ML20070G681

Amend to Application for Ol,Consisting of General Info Required by Environ Rept,Fsar & 10CFR50 & 51

ML20070G681
Person / Time
Site:	Beaver Valley
Issue date:	12/15/1982
From:	Woolever E DUQUESNE LIGHT CO.
To:
Shared Package
ML20070G679	List: ML20070G675 ML20070G681
References
NUDOCS 8212220404
Download: ML20070G681 (30)

Text

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Application for Operating License for

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Beaver Valley Power Station - Unit No. 2 GENERAL INFORMATION SECTION A. E I 1 E e.1 1 1 COMMONWEALTH OF PENNSYLVANIA )

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COUNTY OF ALLEGHENY

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On this 15th day of December, 1982, before me, a Notary Public in

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and for said Commonwealth and County, personnally appeared E. J. Woolever, I

who being duly sworn, deposed and said that (1) he is Vice President of Duquesne Light, (2) he is duly authorized to execute and file this infor-mation and report on behalf of said Company, 3) he is a duly authorized agent for Ohio Edison Company, The Cleveland Electric Illuminating Company, and the Toledo Edison Company, and 4) the statements set forth in the report are true and correct to the best of his knowledge, information, and belief.

E. J(/ Woo' lever - Vice President Nuclear Construction Sworn to and subscribed before me the day and year aforesaid.

MY Notaff Public JUD;IH Y f;ill, f;0% FUClf0 B212220404 821215 ROIS TOV.'NSH,P. AllECHENY COUNTY PDR ADOCK 05000412 MY COMMGs10N EXPIRES VAY 28,1984 PDR Arnwr, Penn@ania Ancoaten of Netanes

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UNITED STATES NUCLEAR REGULATORY COMMISSION Docket No. 50-412 i

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In the Matter of I

DUQUESNE LIGHT COMPANY, OHIO EDISON COMPANY, I

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, and THE TOLEDO EDISON COMPANY m

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Application for Operating License for l

Beaver Valley Power Station - Unit No. 2 Consisting of:

(1) General Information Section (2)

Final Safety Analysis Report (under separate cover)

(3)

Environs, ental Report - Operating License Stage (under separate cover)

Date: December 15 1982

Application for Utilization Facility Operating License General Information 1.

Names and Addresses of Applicants a.

DUQUESNE LIGHT COMPANY 301 Grant Street Pittsburgh, Pennsylvania 15219 b.

OHIO EDISON COMPANY 76 South Main Street Akron, Ohio 44308 c.

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY Post Office Box 5000 Cleveland, Ohio 44101 d.

THE TOLEDO EDISON COMPANY 300 Madison Avenue Toledo, Ohio 43652

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Duquesne Light Company, Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company share undivided ownership of the utilization facility, known as the Beaver Valley Power Station-Unit No. 2.

Together, the four electric power companies have a total installed net demonstrated generating capacity of 14,700,430 kilowatts as of December 31, 1982, and serve a population of 6,525,000 in a service area of about 12,472 square miles in western Pennsylvania, northwestern, northeastern, and central Ohio, the details of which are as follows:

Net Demonstrated Generated Size Capability (KW)

Population (Square Miles)

Duquesne Light company 3,169,000 1,430,000 800 Ohio Edison Company 5,077,430 2,495,000 7,472

Net Demonstrated Generated Size Capability (KW)

Population (Square Miles) he Cleveland Elec-tric Illuminating Company 4,716,000 1,850,000 1,700 The Toledo Edison Company 1,738,000 750,000 2,500 Duquesne Light Company has complete responsibility for the design, installation, construction, operation, and maintenance of the Beaver Valley Power Station-Unit No. 2 and for the prosecution of this application and all related licensing activities and proceedings before the Nuclear Regulatory Commission.

Duquesne Light Company, Ohio Edison Company, he Cleveland Electric Illuminating Company, and The Toledo Edison Company are not ac ting as the agent or represen-tative of any other persons in filing this application.

2.

Description of Business and Organization of Applicants

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a.

Duquesne Light Company is a public utility incorporated under the laws of the Conunonwealth of Pennsylvania and is engaged in the generation, transmission, distribution, and sale of electricity in the City of Pittsburgh and municipalities in Allegheny and Beaver Counties, Pennsylvania.

Duquesne Light Company sells directly to customers in 148 municipalities in ' Pennsylvania and provides wholesale power to one municipality in Pannsylvania.

Duquesne Light Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government.

The names and business addresses of Duquesne Light Company's directors and principal officers, all of whom are citizens of the United L.ates, are aa follows:

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Directors Henry G. Allyn, Jr.

John H. Demaler Christian G. Lantzsch THE PITTSBURGH AND REED SMITH SHAW &

MELLON BANK, N.A.

LAKE ERIE RAILROAD McCLAY Mellon Square COMPANY Box 2009 Pittsburgh, PA 15230 Terminal 3uilding Pittsburgh, PA 15230 Pittsburgh, PA 15219 i

John M. Arthur William H. Knoell Stanley G. Shaffer DUQUESNE LIGHT COMPANY CYCLOPS CORPORATION DUQUESNE LIGHT COMPANY j

One Oxford Centre 650 Washington Road One Oxford Centre 301 Grant Street Pittsburgh, PA 15228 301 Grant Street Pittsburgh, FA 15219 Pittsburgh, PA 15279 C. M. Atkinson Sigo Falk Eric W. Springer DUQUESNE LIGHT COMPANY HEALTH SY9TEMS AGENCY HORTY, SPRINGER &

One Oxford Centre OF SOUTHWESTERN PENN-MATTERN 301 Grant Street

-SYLVANIA 4614 Fifth Avenue Pittsburgh, PA 15279 Centre City Towers Pittsburgh, PA 15213 650 Smithfield Street Doreen E. Boyce Pittsburgh, PA 15222 THE BUHL FOUNDATION Four Gateway Center Pittsburgh, PA 15222 Officers

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John M. Arthur John J. Carey E. J. Woolever Chairman of the Board Vice President-Nuclear Vice President-Nuclear and Chief Executive One Oxford Centre Construction Officer 301 Grant Street Robinson Plaza II One Oxford Centre Pittsburgh, PA 13279 Suite 210 301 Grant Street Pittsburgh, PA 15205 Pittsburgh, PA 15279 Stanley G. Schaffer Clifford N. Dunn James 0. Ellenberger 3

President Vice President-Opera-Controller One Oxford Centre tions One Oxford Centre 301 Grant Street one Oxford Centre 301 Grant Street Pittsburgh, PA 15279 301 Grant Street Pittsburgh, PA 15279 Pittsburgh, PA 15279 Charles M. Atkinson William F. Gilfillan, Jr. Ronald G. Males Vice President-Fiscal Vice President-Customer Treasurer One Oxford Centre Service One Oxford Centre 301 Grant Street One Oxford Centre 301 Grant Street Pittsburgh, PA 15279 301 Grant Street Pittsburgh, PA 15279 Pittsburgh, PA 152"/9 I

Roger D. Beck George I. Rifendifer Thomas Welfer, Jr.

Vice President-Engi-Vice President-General Secretary

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neering & Construction Services One Oxford Centre One Oxford Centre One Oxford Centre 301 Grant Street 301 Grant Street 301 Grant Street Pittsburgh, PA 15279

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Ohio Edison Company is a public utility incorporated under the

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laws of the State of Ohio and is engaged principally in the gen-eration, transmission, distribution, and sale of electricity in northeastern and central Ohio.

Ohio Edison Company sells directly to customers in 528 communities and in rural areas and supplies electric' energy for resale to 21 municipalities.

Ohio Edison Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government. The names and business addresses of Ohio Edison Company's directors and princi-pal officers, all of whom are citizens of the United States, 2 3 as follows:

Directors Donald Blasius Robert L. Loughhead D. W. Tschappat THE TAPPAN COMPANY COPPERWELD STEEL COMPANY OHIO EDISON COMPANY Tappan Park 4000 Mahoning Avenue 76 South Main Street Mansfield, OH 44901 Warren, OH 44483 Akron, OH 44308 Joseph S. Davis Glenn H. Meadows Frank C. Watson THE M. O'NEIL COMPANY McNEIL CORPORATION THE YOUNGSTOWN WELDING 266 South Main Street 666 West Market Street

& ENGINEERING COMPANY Akron, OH 44308 Akron, OH 44303 3700 Oakwood Avenue Youngstown, OH 44509 W. A. Derrick John Nelson William C. Zekan Post Of fice Box 2394 COMMERCIAL SHEARING, A. SHULMAN, INC.

Sandusky, OH 44870 INC.

3550 West Market Street 1775 Logan Avenue Akron, OH 44313 Youngstown, OH 44505 Lucille G. Ford V. A. Owoc R. G. Zimmerman Ashland College OHIO EDISON COMPANY OHIO EDISON COMPANY Ashland, OH 44805 76 South Main Street 76 South Main Street Akron, OH 44308 Akron, OH 44308 J. T. Rogers, Jr.

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OHIO EDISON COMPANY i

76 South Main Street Akron, OH 44308 t

Officers J. T. Rogers, Jr.

David R. Gundry James D. Wilson k

President (effective 2/1/83)

Vice President 76 South Main Street Senior Vice President 76 South Main Street Akron, OH 44308 76 South Main Street Akron, OH 44308 Akron, OH 44308 V. A. Owoc Russell J. Spetrino W. A. Daniels Executive Vice President Vice President and Comptroller 76 South Main Street General Counsel 76 South Main Street Akron, OH 44308 76 South Main Street Akron, OH, 44308 Akron, OH 44308 D. W. Tschappat F. E. Derry G. F. LaFlame Executive Vice Vice President Secretary President 76 South Main Street 76 South Main Street 76 South Main Street Akroc, OH 44308 Akron, OH 44308 Akron, OH 44308 l

l Lynn Firestone C. W. Frederickson H. P. Burg Senior Vice President Vice President Treasurer i

76 South Main Street 76 South Main Street 76 South Main Street Akron, OH 44308 Akron, GH 44308 Akron, OH 44308 R. J. McWhorter D. J. List Senior Vice President Vice President 76 South Main Street 76 South Main Street

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Akron, OH 44308 Akron, OH 44308 R. G. Zimmerman Ronald D. Best Senior Vice President Vice President 76 South Main Street 76 South Main Street Akron, OH 44308 Akron, OH 44308 i

c.

The Cleveland Electric Illuminating Company is a public utility incorporated under the laws of the State of Ohio and is engaged I

principally in the generation, transmission, distribution, and sales of electricity in northeastern Ohio.

The Cleveland Electric Illuminating Company sells directly to customers in the City of Cleveland and 88 other municipalities and surrounding territories.

The Cleveland Electric Illuminating Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government.

The names and business addresses of The

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Cleveland Electric Illuminating Company's directors and principal officers, all of whom are citizens of the United States, are as follows:

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Directors Leigh Carter Richard A. Miller Herbert E. Strawbridge TREMCO, INC.

THE ILLUMINATING

'IHE HIGBEE COMPANY 10701 Shaker Blvd.

COMPANY 100 Public Square Cleveland, OH 44104 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Robert M. Ginn Karl H. Rudolph Richard B. Tullis THE ILLUMINATING THE ILLUMINATING HARRIS 00RPORATION COMPANY COMPANY Melbourne, FL 32919 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Roy H. Holdt Craig R. Smith Harold L. Williams WHITE CONSOLIDATED THE WARNER & SWASEY THE ILLUMINATING INDUSTRIES, INC.

COMPANY COMPANY 11770 Berea Road 11100 Cedar Road 55 Public Square Cleveland, OH 44111 Cleveland, OH 44106,

Cleveland, OH 44113 John Lansdale, Jr.

Charles E. Spahr SQUIRE, SANDERS &

1901 Terminal Tower DEMPSEY Building 21 Dupont Circle, NW Cleveland, OH 44113 Washington, DC 20036

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Officers Robert M. Ginn Dalwyn R. Davidson Alan D. Wright President Senior Vice President Vice President-Public 55 Public Square 55 Public Square Affairs & Legal Cleveland, OH 44113 Cleveland, OH 44113 55 Public Square Cleveland, OH 44113 Richard A. Miller John J. Misic Murray R. Edelman Executive Vice Vice President-Vice President-President Distribution & Services Nuclear Group 55 Public Square 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Cleveland, OH 44113 Harold L. Williams Edgar H. Maugans Executive Vice Vice President-President Finance 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113

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Edgar H. Maugans E. Lyle Pepin Richard C. Horning Vice President-Secretary Assistant Treasurer

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Finance 55 Public Square 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Cleveland, OH 44113 R. J. Farling Janis T. Percio Delores Hargrove Vice President Assistant Secretary Assistant Treasurer Administrative Services 55 Public Square 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Cleveland, OH 44113 John W. Fenker Larry K. Leonard William B. Kinde Vice President Assistant Secretary Assistant Treasurer l

Power Eupply 55 Public Square 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Cleveland, OH 44113 Frank A. Kender Andrew R. Felmer Charles C. Chopp Vice President Treasurer Controller Marketing 55 Public Square 55 Public Square 55 Public Square Cleveland, OH 44113 Cleveland, OH 44113 Cleveland, OH 44113 d.

The Toledo Edison Company is a public utility incorporated under the laws of the State of Ohio and is engaged principally in the l

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generation, traasmission, distribution, and sale of electricity in northwestern Ohio.

The Toledo Edison Company sells directly l

to customers in 49 incorporated municipalities and in rural areas and provides wholesale power to 13 municipalities and one rural electric cooperative.

The Toledo Edison Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government.

The names and business addresses of The Toledo Edison Company's I

directors and principal officers, all of whom are citizens of the United States, are as follows:

Directors Richard P. Anderson Richard P. Crouse Elwood L. Elberson 1200 Dussel Drive THE TOLEDO EDISON Post Office Box 388 Maumee, OH 43537 COMPANY Defiance, OH 43512 300 Madison Avenue

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Toledo, OH 43652 Samuel G. Carson Robert H. Davies Stanley W. Gustafson Summit & Madison Post Office Box 1035 Post Office Box 1000 Avenue Toledo, OH 43666 Toledo, OH 43697 Toledo, OH 43603

Wendell A. Johnson Donald G. Nicholson Williard I. Webb, III THE TOLEDO EDISON THE TOLEDO EDISON Post Office Box 1688 COMPANY COMPANY Toledo, OH 43603 300 Madison Avenue 300 Madison Avenue Toledo, OH 43652 Toledo, OH 43652 Marvin S. Kobacker Henry A. Page, Jr.

John P. Williamson Post Office Box 1508 MEDICAL COLLEGE OF THE TOLEDO EDISON Central Station OHIO AT TOLEDO CONFANY Toledo, OH 43603 3000 Arlington Avenue 300 Madison Avenue Toledo, OH 43614 Toledo, OH 43652 Isabel F. Martin Lyman C. Phillips Robert G. Wingerter One Stranahan Square THE TOLEDO EDISON 811 Madison Avenue Toledo, OH 43604 COMPANY Toledo, Ohio 43695 300 Madison Avenue Toledo, OH 43652 Officers John P. Williamson Frank W. Keith David K. Zaski Chairman of the Board Vice President Vice President

& Chief Executive Administration Customer Services Officer 300 Madison Avenue 300 Madison Avenue 300' Madison Avenue Toledo, OH 43652 Toledo, OH 43652 Toledo, OH 43652

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Wendell A. Johnson David A. Nelson Stratman Cooke President and Chief Vice President Secretary Operating Officer Administrative Service 300 Madison Avenue 300 Madison Avenue 300 Madison Avenue Toledo, OH 43652 Toledo, OH 43652 Toledo, OH 43652 Richard P. Crouse Donald G. Nicholson Donald H. Saunders Vice President Vice President Treasurer Nuclear Finance 300 Madison Avenue 300 Madison Avenue 300 Madison Avenue Toledo, OH 43652 Toledo, OH 43652 Toledo, OH 43652 John R. Dyer Lyman C. Phillips Paul G. Busby Vice President Vice President Controller Public Relations Corporate Development 300 Madison Avenue 300 Madison Avenue 300 Madison Avenue Toledo, OH 43652 Toledo, OH 43652 Toledo, OH 43652 Lowell E. Roe Vice President Energy Supply 300 Madison Avenue Toledo, OH 43652

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3.

Class and Period of License Requested Applicants request a class 103 operating license for a period of 40 years from' date of issuance of the operating license, authorizing Duquesne Light Company to operate the utilization facility described in Item 5 below.

4.

Additional Licenses Requested Applicants request sitch additional source, special nuclear, and by-product material licenses as may be necessary and appropriate to the operation of the facility.

5.

Description and Use of Facility The Beaver Valley Power Station-Unit No. 2 is a nuclear electric generating plant with a pressurized water reactor generating system, with a rated core thermal power of 2660 MWt and a design power of 2774 MWt.

The corresponding unit gross electrical outputs are 894 MWe and 923 MWe.

The Beaver Valley Power Station-Unit No. 2, is located on the southern shore of the Ohio River in Beaver County, Pennsylvania, approximately 22 miles northwest of Pittsburgh and 5 miles east of East Liverpool, Ohio.

Details concerning the plant and site are contained in the Environ-mental Report - Operating License Stage, and in the Final Safety Analysis Report (FSAR), both of which are submitted under separate cover and which constitute parts of this application.

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6.

Financial Qualifications

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Applicants are electric utilities within the meaning of 10 CFR Section 50.2(x) and therefore are not required to submit financial qualification information.

10 CFR Section 50.33(f)(1).

7.

Technical Qualifications A description of the technical qualifications of Duquesne Light Com-pany and its principal contractors is contained in Chapters 1 and 13 of the FSAR.

A description of Duquesne Light Company's training program is contained in Chapter 13 of the FSAR.

8.

a.

Regulatory Agencies One or more regulatory agencies and municipalities may have jurisdiction over the respective rates and services of the Appli-cants incident to the generation and distribution of electrical

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energy from the utilization facility for which a class 103 license is requested herein.

The names and addresses of such agencies and the names of such municipalities are set forth in the attached Appendices A through D.

b.

Trade and News Publications The lists of trade and news publications which are in general circulation in the respective service areas of the Applicants and which are considered appropriate to give reasonable notice of this Application to those municipalities, private utilities, public bodies, and cooperatives which have a potential interest in the utilization facility are set forth in Appendices E through I.

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9.

Security Agreement The Application does not contain any Restricted Data or other defense information.

Applicants agree that they will not permit any indi-vidual to have access to Restricted Data until the Civil Service Com-mission shall have made an investigation and report to the Nuclear Regulatory Conunission on the character, associations, and loyalty of such individual, and the Nuclear Regulatory Commission shall have determined that permitting such person to have access to Restricted Data will not endanger the common defense and security.

10.

Communications Duquesne Light Company, on behalf of itself, Ohio Edison Company, The Cleveland Electric Illuminating Company, and the Toledo Edison Com-pany, will hereaf ter submit all further information required in con-nection with this Application. Applicants requested that all cenununi-(

cations pertaining to this Application be sent to:

Earl J. Woolever Vice President-Nuclear Construction Robinson Plaza II, Suite 210 Pittsburgh, PA 15205 In addition, it is requested that copies of each communication be sent to Duquesne Light Company's Washington counsel:

Gerald Charnoff, Esquire Jay E. Silberg, Esquire Shaw, Pittman, Potts and Trowbridge 1800 M Street, NW Suite 900 South Washington, DC 20036

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Duquesne Light Company By 9 E.J.doolever-VicePresident Nuclear Construction Sworn to and subscribed before me, this 15th day of 1982.

December,

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Notary Public JUDITH M NILL. NOTARY PUBLIC R0;S 107tNSHIP. ALLECHENY COUNTY My Commission Expires:

MY CGVM'590N EXPIRES '/A) 28,1984 Member Penas,ina.a As>cciation el Nolanes

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Ohio Edison Company By M

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Sworn to and subscribed before me, this [b day of

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hhA 1982.

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Notary Public

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The Cleveland Electric Illuminating ompany By M

Dalwy/R. D.svidson v Vice President, System Engineering and Construction Group s

Sworn to and subscribed before me, this

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, 1982.

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WILLIAM L KIRNEh Attorcey NOTARY PUBUC STAif CF CHID My temmission has no estii.tsa dste.

My Commission Expires:

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LyNnC.Phillips Vice President, Corporate

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Planning and Development Sworn to and subscribed before me, this 3Q day of OM 1982.

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Notary Public. State of Ohio

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My commission has no expiration dar section 147.03 R.C.

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APPENDIX A i

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b Duquesne Light Company Regulatory Agencies Having Jurisdiction Over Rates and Services 1.

Federal Energy Regulatory Commission 825 North Capitol Street, NE

.f Washington, DC 20426 2.

Pennsylvania Public Utility Commission Post Office Box 3265 Harrisburg, PA 17120

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APPENDIX B Ohio Edison Company Regulatory Agencies Having Jurivua.: ion Over Rates and Services 1.

Federal Energy Regulatory Coamaission 825 North Capitol Street, NE Washington, DC 20426 2.

he Public Utilities Commission of Ohio 375 South High Street l

Coltsabus, OH 43215 3.

he following Municipalities:

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Akron Division Bay Division Akron Bay View Aurora Bellevue Barberton Castalia Boston Heights Huron Brady Lake Marblehead Briarwood Beach Milan Broadview Heights

• North Fairfield Brunswick Norwalk Chippewa-On-The-Lake Port Clinton Clinton Put-In-Bay Cayahoga Falls

• Sandusky Doylestown Fairlawn Lake Erie Division Glenwillow Amberat*

Gloria Glens Park Avon*

Hartville Berlin Heights Kent Elyria Lakamore Grafton*

i Macedonia Kipton Mantua LaGrange Medina Lorain Mogadore Morth Ridgeville Munroe Falls Oberlin*

" orth Royalton*

Olmstead Falls Northfield Sheffield

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Sheffield Lake Norton Oakwood*

South Amherst Peninsula Vermilion Ravenna Wakeman Reminderville Rich field.

Mansfield Division Silver Lake Ashland Solon Butler Stow Crestline Streetsboro Hayesville Strongsville*

Jeromesville lugar Bush Knolls Loudonville Tallmadge Mansfield Twinsburg Mifflin Wadsworth Ontario Walton Hills

• Perrysville Westfield Center Polk

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Marion Division Warren Division Ashley Cortland Caledonia Carrettsville Cardington Hiram Chesterville Lordstown Delaware Newton Falls

• Dublin

• Warren Edison West Farmington Green Camp Windham Magnetic Springs Marion Youngstown Division Mt. Gilead Andover Flain City Campbell Richwood Canfield Shawnee Hills Columbiana*

Craig Beach Springfield Division East Palestine Catawba Girard Donneleville Hanoverton Enon Hubbard*

Fairborn*

Leetonia Lawrenceville Lisbon

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London Lowellville North Hampton Mcdonald Springfield New Middletown

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Tremont New Waterford West Jefferson

• Orangeville Poland Stark Division Rogers Alliance Salem Beloit Struthers Brewster Washingtonville

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Canal Fulton Yankee Lake Creston Youngstown Dalton Limaville Massillon Meyers Lake Navarre Rittman Sebring

• 0nly partially served.

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APPENDIX C N..

l The Cleveland Electric Illuminating Company Regulatory Agencies Having Jurisdiction Over Rates,and Services 1.

Federal Energy Regulatory Commission' l

825 North Capitol Street, NE I

Washington, DC 20426 i

2.

The Public Utilities Commission of Ohio l

361 E. Broad Street Columbus, OH 43215 j

i 3.

The following Municipalities:

i CUYAHOGA COUNTY

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City of Bay Village City of Maple Heights f

City of Beachwood Village of Mayfield l

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j City of Bedford City of Mayfield Heights j

City of Bedford Heights City of Middleburg Heights Village of Bentleyville Village of Moreland Hills j

City of Beres Village of Newburgh Heights l

Village of Bratenahl City of North Olmsted

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City of Brecksville Village of North Rand 511 l

City of Broadview Heights City of Nort'n Royalton i

City of Brook Park Village of Oakwood l

City of Brooklyn Village of Olmsted Falls Village of Brooklyn Heights Village of Orange Village of Chagrin Heights City of Parma i

City of Cleveland City of Parma Heights City of Cleveland Heights City of Pepper Pike l

Village of Cuyahoga Heights City of Richmond Heights City of East Cleveland City of Rocky River City of Euclid City of Seven Hills City of Fairview Park City of Shaker Heights City of Garfield Heights City of Solon Village c f Gates Mills City of South Euclid Village of Glenwillow City of Strongsville City of Highland Heights City of University Heights Village of Hunting Valley Village of Valley View City of Independence Village of Witon Hills f

City of Lakewood City of Warrensville Heights

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Village of Linndalts City of Westlake s

City of Lyndhurst Village of Woodmere

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LAKE COUNTY City of Eastlake Village of North Perry Village of Fairport Harbor Village of Perry Village of Grand River Village of Timberlake City of Kirtland Village of Waite Hill City of Kirtland Hills City of Wickliffe Village of Lakeline City of Willoughby Village of Madison City of Willowick City of Mentor City of Willoughby Hills City of Mentor-on-the-Lake GEAUGA COUNTY l

Village of Aquilla Village of Middlefield Village of Burton Village of South Russell Village of Chardon LORAIN COUNTY I

1-l City of'Avon City of North Ridgeville City of Avon Lake ASHTABULA COUNTY City of Aahtabula Village of Jefferson City of Conneaut Village of North Kingsville City of Geneva Village of Orwell Village of Geneva-on-the-Lake Village of Rock Creek l

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l APPENDIX D The Toledo $dison Company Regulatory Agencies Having Jurisdiction Over Rates and Services 1.

Federal Energy Regulatory Comunission 825 North Capitol Street, NE

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Washington, DC 20426 l

2.

The Public Utilities Comunission of Ohio 375 South High Street Columbus, OH 43215

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3.

The following Municipalities:

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Alvordton McClure Archbold Metamora Berkey Millbury Blakeslee Milton Center Burgoon New Bavaria Clay Center Ney Clyde Northwood Defiance Oregon Delta Ottawa Hills Edon Perrysburg Fayette Risingsun l

I Gibsonburg Rocky Ridge Grand Rapids Rossford Green Springs Stryker Hamler Swanton Harbor View Sylvania Helena Toledo Holgate Walbridge Holland Waterville Jerry City Wauseon i

Liberty Center Wayne Lindsey Weston Luckey Watt Unity Lyons Whitehouse Matssee

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APPENDIX E List of Trade Publications NAME ADDRESS Atomic Industrial Forum, Inc.

Public Affs. irs & Information Program 7101 Wisconsin Avenue, Suite 605 Washington, DC 20014 Electrical Light & Power 221 Columbus Avenue Boston, MA 02116 Electrical Week 1221 Avenue of the Americas New York, NY 10020 Electrical World 330 West 42nd Street New York, NY 10036 s

Nuclear Assurance Corporation Librarian 1

24 Executive Park West Atlanta, GA 30329 Nuclear Industry 475 Park Avenue South New York, NY 10016 Nuclear News 244 Ogden Avenue Hinsdale, IL 60521 Nucleonics 310 W. 42nd Street New York, NY 10036 Power Engineering Technical Publishing Company L

1301 S. Grove Avenue Barrington, IL 60010 Public Utilities Fortnightly Suite 502 1828 L Street, NW Washington, DC 20036

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P APPENDIX F Duquesne Light Company List of News Publications in Service Area

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PITTSBURGR PRESS NEW YORK TIMES DAILY TRIBUNE 34 Blvd. of the Allies 299 West 43rd' Street 335 East Mall Boulevard Pittsburgh, PA 152f2 New York, NY 10036 Expo Mart Monroeville, PA 15146 PITTSBURGH POST-GAZETTE WALL STREET JOURNAL EVENING REVIEW 50 Blvd. of the Allies One Oliver Plaza 210 East Fourth Street Pitts'ourgh, PA 15222 Suite 208 East Liverpool, OH 43920 Pittsburgh, PA 15222 BEAVER COUNTY TIMES USA TODAY GREENSBURG TRIBUNE Box 400 Post Office Box.500 REVIEW Beaver, PA 15009 Washington, DC 20044 Cabin Rill Drive Greensburgh, PA 15601 e

{L McKEESPORT DAILY NEWS VALLEY NEWS DISPATCH l

Post Office Box 128 210 Fourth Avenue McKeesport, PA Tarentum, PA 15084

APPENDIX G k

OHIO EDISON COMPANY - List of News Pubications in Service Area AKRON DIVISION MANSFIELD DIVISION AKRON BEACON JOURNAL ASHLAND TIMES-GAZETTE 44 E. Exchange St.

40-46 E. Second St.

Akron, OH 44328 Ashland, OH 44805 MEDINA COUNTY GAZETTE NEWS JOURNAL 885 W. Liberty St.

70 W. Fourth St.

Medina, OH 44256 Mansfield, OH 44902 RECORD COURIER 124 N. Chestnut St.

MARION DIVISION Ravenna, OH 44266 MARION STAR 150 Court Street BAY DIVISION Marion, OH 43302 BELLEVUE GAZETTE GALION INQUIRER Gazette Building N. Market St.

Bellevue, OH 44811 Galion, OH 44833 NORWALK REFLECTOR DELAWARE GAZETTE 61 E. Monroe 18 E. William St.

Norwalk, OH 44857 Delaware, OH 43015 PORT CLINTON NEWS 114 E. Fifth St.

SPRINGFIELD DIVISION Port Clinton, OH 43452 THE MADISON PRESS SANDUSKY REGISTER 30 S. Oak St.

314 W. Market Loridon, OH 43140 Sandusky, OH 44870 SPRINGFIELD NEWS-SUN 202 N. Limestone St.

LAKE ERIE DIVISION Springfield, OH 45501 CHRONICLE-TELEGRAN FAIRBORN DAILY HERALD 225 East Ave.

One Herald Square l

Elyria OH 44035 Fairborn, OH 45324

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THE JOURNAL 1657 Broadway Lorain, OH 44052

STARK DIVISION YOUNGSTOWN DIVISION "c

ALLIANCE REVIEW THE MORNING JOURNAL 40 S. Linden Ave.

308 W. Maple St.

Alliance, OH 46601 Lisbon, OH 44432 EVENING INDEPENDENT THE STAR BEACON 50 North St.

4626 Park Ave.

Massillon, OH 44646 Ashtabula, OH 44004 THE DAILY RECORD THE S LEM NEWS 212 E. Liberty St.

161 N. Lincoln Wooster, OH 44691 Salem, OH 44460 YOUNGSTOWN VINDICATOR WARREN DIVISION Vindicator Square &

W. Boardman WARREN TRIBUNE-CHRONICLE Youngstown, OH 44501 240 Franklin St.

Warren, OH 44482 SHARON HERALD S. Doc k S t.

THE DAILY TIMES Sharon, PA 16146 35 W. State St.

Niles, OH 44446 1

4 F

a

APPENDIX H The Cleveland Electric Illuminating Company List of News Publications in Service Area CUYAHOGA COUNT _Y ASHTABULA COUNTY THE PLAIN DEALER ASHTABULA STAR BEACON 1801 Superior Ave.

4626 Park Ave.

Cleveland, OH 44114 Ashtabula, OH 44004 CONNEAUT NEWS HERALD LAKE COUltrY 182 Broad St.

Conneaut, OH 44030 THE NEWS HERALD 38879 Mentor Ave.

GENEVA PREE PRESS Willoughby, OH 44094 23 S. Forest St.

Geneva, OH 44041 PAINESVILLE TELEGRAPH

(

84 N. State St.

.{-

Painesville, OH 44097 IDRAIN COUNTY ELYRIA CHRONICAL TELEGRAM GEAUGA COUNTY 225 East Avenue Elyria, OH 44035 THE PLAIN DEALER 1801 Superior Ave.

14 RAIN JOURNAL Cleveland, OH 44114 1657 Broadway Lorain, OH 44052 GEAUGA TIMES-LEADER 111 Water St.

Chardon, OH 44024 l

l

{

APPENDIX I l

The Toledo Edison Company List of News Publications in Service Area THE ADVANCE REPORTER CLYDE ENTERPRISE FREMONT NEWS MESSENGER 106 N. Defiance Post Office Box 29 1170 Cedar St.

Strykcr, OH 43557 Clyde, OH 43410 Fremont, OH 43420 ANTHONY WAYNE HERALD THE COLLEGIAN-U OF T FULTON COUNTY EXPOSITOR 4444 W. Alexis Rd.

2801 W. Bancroft 201 N. Fulton Toledo, OH 43623 Toledo, OH 43606 Wauseon, OH 43567 ARCHBOLD BUCKEYE CONNECTIONS LIBERTY CENTER PRESS l

207 N. Defiance Post Office Box 113 511 East St.

Archbold, OH 43502 Toledo, OH 43694 Liberty' Center, OH 43532 BG NEWS <,SU COMMUNITY MIRROR LORAIN JOURNAL 104 University Hall 113 W. Wayne St.

1657 Broadway Bowling Green, OH 43403 Massee, OH 43537 Lorain, OH 44052 THE BELLEVUE GAZETTE CONSUMERS GUIDE MAUMEE VALLEY HERALD 107 N. Sandusky St.

4037 Monroe St.

4444 W. Alexis Rd.

Gazette Bldg.

Suite il Toledo, OH 43623 Bellevue, OH 44811 Toledo, OH 43606 MONTPELIER LEADER-THE BLADE DELTA ATLAS ENTERPRISE 541 Superior St.

212-1/2 Main St.

319 W. Main St.

Toledo, OH 43660 Delta, OH 43515 Montpelier, OH 43543 BOWLING GREEN DEFIANCE CRESENT NEWS HERALD SENTINEL-TRIBUNE

-NEWS 115 W. Second St.

Post Office Box 88 Second & Perry Sts.

Port Clinton, OH 43452 Bowling Green, OH 43402 Defiance, OH 43512 NORTHWEST-SIGNAL BRYAN TIMES EDON COMMERCIAL Route 474 East 121 S. Walnut St.

N. Michigan St.

Post Office Box 567 Bryan, OH 43506 Edon, OH 43518 Napoleon, OH 43545 CATHOLIC CHRONICLE EDGE TON EARTH OTTAWA COUNTY EXPONENT Post Of fice Box 1866 Edgerton, OH 43517 106 Locust St.

(1933 Spielbusch)

Oak Harbor, OH 43449 Toledo, OH 43603 FAYETTE REVIEW 118 W. Main St.

PERRYSBURG MESSENGER

[

CHRONICLE-TELEGRAM Fayette, OH 43521

-JOURNAL 225 East Ave.

229 W.

Sixth St.

Elyria, OH 44035 Perrysburg, OH 43551

THE POINT AND SHORELAND THE SUBURBAN PRESS TOLEDO UNION JOURNAL

(

JOURNAL Post Of fice Box 550 2300 Ashland Ave.

Post Office Box 5166 Genoa, OH 43430 Toledo, OH 43620 (5108 N. Staunit St.)

Toledo, OH 43611 SWANTON ENTERPRISE THE VILLAGE VOICE 97 N. Main St.

3463 Woodley Rd.

POINT PLACE HERALD Swanton, OH 43558 Toledo, OH 43623 4444 W. Alexis Rd.

Toledo, OH 43623 SYLVANIA SENTINEL WEST TOLEDO HERALD HERALD 4444 W. Alexis Rd.

ROSSFORD RECORD 4444 W. Alexis Rd.

Toledo, OH 43623 Post Office Box 106 Toledo, OH 43623 Perrysburg, OH 43551 TOLEDO BUSINESS NEWS SANDUSKY REGISTER Toledo Area Chan.ber 314 W. Market St.

of Commerce Sandusky, OH 44870 218 Huron St.

Toledo, OH 43604

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Tha Challengo: Enargy for tha New Pittsburgh On the coveris Pittsburgh, the heart BO8Fd Of Directors of Duquesne Light s service area.

Ranked as one of the most liveable John M. Arthur $

Philip A. Fleger t 8 Chairman of the Board and Chief Executrve Retired Chairman of the Board and Chief cities in the country, Pittsburgh is in cw f the Cwnpany ExecuWeNewof theConwany the midst of Renaissance ll, a mas-sive program of new construction and Stanley G. Schaffer William H. Knoeil t renovation. This huge urban redevel-Presidentof theCompany President and Chief Executive Officer of opment activity is indicative of the Charles M. Atkinson ksNa d$rNtNfeIl$MuEsf vitality of Duquesne's service area Vice President-Fiscal of the Company ts increasing demand for electric Henry G. Allyn,Jr.*t A e

a o Me on Bank,N.A.and Mellon erOY' President and Chief Executive Officer of The National Corporation Pittsburgh and Lake Ene Railroad Company Eric W. Springer t COnteniS Doreen E. Boyce*$

Partner, Horty. Springer and Mattem ectw.

BupouMaton WWah Board of Directors......... Inside front

• • ' 0' Aud t Com nee 1

John H. Demmler t

],

Financial Highlights-1981..

To Our Stockholders....

.2&3

$nne. Re d Smith Shaw & McClay y

.uw 1981 In Review..

.... 4-13

• New Director Company Report on Financial Sigo Falk*

e Retired as Director on August 19.1981 Statements 14 Associate Director. Health Systems Agency i

Opinion of Independent Certified

.. 14 Public Accountants.

Finar%allnformation

.15-35 Company Officers

. 36 Company Service Area Map

. 36 Common Stock Dividends.. inside back Form 10-K Offer..

inside back g 'i..

l ; y' CAPCO.

inside back l

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New Director F

At the Company's April 21,1981 I

Stockholders' Meeting, Mr. Henry G.

i Allyn, Jr. was elected to the Board of Directors. Mr. Allyn is President and Chief Executive Officer of The Pitts-g f

g burgh and Lake Erie Railroad Company.

3 Director Retires i.-(

b j

p On August 19,1961, Philip A. Fleger

.. J.

)

i resigned as a Director of the Com-g-

^

E' pany. Mr. Fleger was Chairman of the j

Board and Chief Executive Officer of f

the Company from 1950 to 1968 and

-.?!

was a Director of the Company for 42 years. The employees, Directors arid 74yp '

l officers of the Company appreciate 7.,

the many years that Mr. Fleger so r

.u y

capably served the Company.

Left to right: John H. Demmler; Doreen E. Boyce; Enc W. Springer; John M. Arthur

- - - - ~

Financial Highlights-1981 Duquesne Ught Company i

Percent i

l

• inancial 1981 1980 Increase

{ Total Operating Revenues (000).......................

$796,847

$689,465 15.6

[

Nat income (000)....................................

$108,871

$92,962 17.1 Earnings Per Share of Common Stock..................

32.06

$1.82 13.2 Dividends Per Share of Common Stock.................

$1.85*

$1.80 2.8 Ghares of Common Stock Outstanding at Year End.......

45,302,520 40,166,083 12.8 t

Operating Utility Plant (000)....................................

5 2,809,753

$ 2,604,333 7.9 M W H Sale s.........................................

13,630,269 13,297,453 2.5 1

Peak Load Megawatts................................

2,522 2,474 1.9 l

i Cost of Fuel Per Million BTU...........................

159.7t 149.8t 6.6 Average BTU Per KWH Output.........................

10,931 10,811 1.1 Annual System Output MWH...........................

14,323,618 14,026,435 2.1 1

• The quarterly dividend was raised from 45t to 47%t per share payable October 1.1981. This is an indicated annual rate of $1.90.

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Q Left to right: Charles M. Atkinson; Henry G. Allyn, Jr.; S.go Falk left to right: William H. Knoell; Stanley G. Schaffer; G. Christian Lantzsch 1

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1

Ta Our Stockhrid:rs Despite high interest rates, continuing We expect the pattern of new peak generating facilities using renewable inflation and a serious business records to continue in future years.

energy resources such as sola recession which beganin the fourth New electric steelmaking furnaces water or waste. We believe this new qua:'ter, we are pleased to report that and 20 major commercial projects in purchase rate will encourage the 1981 was a reasonably good year for the planning stage or under construc-building of customer-owned generat-your Company. Our earnings rose tion in the Pittsburgh area will have a ing facilities and may help to reduce modestly from $1.82 in 1980 to $2.06 in positive impact on our sales over the the need for construction of additional 1981, a 13% increase. Higher sales next several years. Among the com-Company-owned generating units in cnd rate relief were the main reasons mercial projects are two high-rise the future, for the improvements.

office complexes scheduled for com-In February, the Pennsylvania pietion in 1982, and two more are Cost Reductions Public Utility Commission (PUC) schedufed for completion in 1983.

One of the bright spots of 1981 was a approved a rate increase of $47.5 mil-major step toward the ending of a lion and an additionalincrease of Nuclear Performance serious cost threat. At this time last

$64.2 million in June. While the total Comeback year, we were concemed that we amount received was only 52% of the Our Beaver Valley Power Station Unit might be forced to install " scrubbers" amount requested, this amount did No.1 operated very well during 1981 at our Cheswick Power Station.

make possible a mid-year dividend and had an availability rate of 74%-

However, the Environmental Protec-increase, which raised the indicated the unit's best performance since its tion Agency approved revised air cnnual dividend rate from $1.80 to start-up six years ago. During the quality regulations for Allegheny

$1.90 por share.

three-month coal strike in early 1981, Countyincluding a revised standard The Company will file for additional Beaver Valley produced 17% of all the for sulfur oxide emissions applicable rate relief within the next few months.

electricity used by our customers. In to the station. The revised standard The amount of the increase to be late December, Beaver Valley Unit will enable the Company to achieve requested is under consideration.

No.1 was removed from service for compliance through the use of a Sales and Prospects an estimated period of approximately blend of regular and low-sulfur coal.

five months for refueling and addi.

Over the life of the station, this alter-On July 9,1981, your Company tional modifications required by the native should save our customers an set a new record peak-hour load of Nuclear Regulatory Commission estimated one billion dollars.

2,522,000 kilowatts. This was 48,000 (NRC).

kilowatts above the previous record, set in 1980. In addition, our output of Conservation Efforts 51,742,000 kilowatt-hours that day was To assist homeowners in conserva-3% higher than on the previous tion efforts Duquesne Light, in coop-record day.

eration with the state, initiated a Residential Conservation Service program. For a below-cost charge of

$15, a certified energy auditor makes a basement-to-attic efficiency evalua-tion, recommends steps the home-owner can take to save energy, and estimates the savings for each action taken.

In October, the Company estao-lished a special rate for the purchase of electricity from customer-owned O

2

l i

ANNUAL SYSTEM PEAK LOAD Management Audit

..* 9 " "*

During the year a management audit.

mandated by the PUC, was con-ib N

L.'

ducted by the Boston firm of Temple,

- ! ![i.s Barker and Sloane,Inc.While we r

i w

believe that the audit, when com-b ~ p' g

pleted, will give Duquesne Light good n

- J marks on overall management, super-d

' ' ;'p l

FORECAST g y Vision and employee competenCO,we 7

..[.M../

c 2500

/

o' expect and will welcome constructive

/

criticism that will help us make our f

?f7*

4 operations even more efficient.

',, W A Future Concern Sh

,i o'

Looking ahead, our most pressing

_2

i concernis our ability to finance the N

construction necessary to meet this

1. M t

f~

community's future electrical needs

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as reliably as in the past. The area's

1. / f-.

sooo economic future, including the crea-j f

o o

tion of much-needed jobs, depends I

on an adequate supply of electric AcmAq energy. We anticipate that electrical 800 consumption in our territory will con-tinue to grow although conservation g

efforts will keep the rate of growth at o

o 9

a moderate level.

. Our ability to cope with the increas-1910 '20 *30 '40 '50 '60 70 '81 '90 ing demand for energyis directly Stanley G. Schaffer and John M. Arthur at related to the rates we are permitted the construction site of the Company's C Environmental Auditing to charge for the service we provide.

new headquarters.

ogram Therefore,for the continued growth Also on the environmental front, the and economic stability of our com-Company developed a new Environ-munity,we must continue to seek mental Compliance Assurance Pro-reasonable rate relief.

gram designed toimprove theinfor-With your help we expect to provide mation flow to management on the the energy necessar)'to meet the acceptability of all operations that aspirationsof thoseweserve.

affect the environment. The program will help our operating departments n,,

/j 4 4,7,,f h.

comply with changing environmental regulations and implement effective environmental control systems. We John M. Arthur believe this coordinated effort will Chairman of the Board help minimize the cost of keeping all and Cheef Executive Offcer Company operations in compliance

/

with local, state and federal environ-L,/

mentalregulations.

12

(

Stanley G. Schaffer President February 18,1982 C

f l-3

h:, _

~

t 1981 in Roviaw itv o' taa eitt='ura" re9'o"== *ei' a=

T

-L-providing future revenues for the p

2 increased Revenues comp M0re t$an 20 major construction Revenues for 1981 increased by $107 million over 1980. Approximately 90%

projects are in progress or in the final i

of the increase resulted from rate planning stage for Pittsburgh's

,g' i

relief and the energy cost rate. The Golden Triangle. Among those new remaining 10% came from increased buildings scheduled for occupancy in I

customer sales and the Pennsylvania 1982 are the 20-story National Steel O---g N m tax surcharge.

Building, the 10-story Comstock Cen-ter and tne 46-story One Oxford Cen-

_m,y 5~

Customer Consumption tre (the Company's future corporate Increased headquarters). Scheduled for 1983 Electric kilowatt-hour sales were up occupancy are the 54-story Dravo 2%% overlast year. The two new Building and the 40-story PPG Place.

M 170-ton electric arc furnaces at Colt In addition to the present down-E-

d '-

l Industries' Crucible Stainless and town construction programs, the C

' -~

l wellas a number of new or expanded significant strides in diversifying

[M

-~

Alloy Steel Division at Midland, Pa., as Pittsburgh area continues to make I-:::

business customers, contributed sig-employment opportunities. Major nificantlyio theincreased sales.

gains in the non-manufacturing job 4

About 29% of electric revenues market have resultedin area unem-came from residentialcustomers, ployment percentages below both 31% from commercial customers and state and nationallevels.

a*

[

38% from industrial customers. The c. _a remaining 2% came from such other Duquesne Light will relocate its corporate mme sources as street lighting and sales to headquarters to One Oxford Centre dur-8"p4 other utilities ing the fall of 1982. By choosing to remain L srW Pittsburgh s Renaissance 11is we!I in d wnt wn Pittsburgh, the Company

'e undetway. New construction and was able to take advantage of the building rehabilitation projects extreraety competitive development situa-throughout the entire downtown area tion and use its negotiating strength as a g

are contributing to the economic vital-major tenant to secure an unusually g

attractive long-term lease. This will assure the Company of reasonable space costs p,,.,,

over the next 20 years.

Roberto Clemente Park on the North The North Shore Development, due within The Blockhouse. a pre-Revolutionary Shore of the Allegheny River willextend the decade, will feature a new waterfront structure at the Point. is one ofmany to the 7th Street Bridge and willonclude a with one or two forst-class restaurants historic landmarks that the Coty nas pre-public plaza in the Federal-Sandushy within walking distance of Three Rivers served as an importantpart ofits heritage.

Streets block.

Stadium and Allegheny Center.

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Cust3m;r CCns;rV;tl n in 1981, the Company pres:nted

/. -

'q Activiti;c National En:rgy Watch awards to 22

^

Most of the Company's residential large comm:rcial and industrial customers.

[/

x customers are reached through effec-i J('

tive mass media methods. Every opportunityis taken to provide con-N servation of energy messages via bill

} Q

\\,e.,

stuffers, brochures and booklets, 9

radio and TV talk shows and newspa-5-YEAR GROWTH KWH SALES Dr W

per ads. Group presentations and a jZ d

telephone answering service covering appliance and homemaking matters are used to convey conservation

" - g o

'o p information to custorrors on an indi.

'12 vidualized basis.

Reuhntal Company engineers continued to o~

o io o%

work closely with industrial and com-o j

mercial customers, helping them plan coewnen:mi a

4 and implement economical ways to x.,

save energy and dollars. In addition, g

the Company conducted an Industrial e

o o-n Load Management Seminarin coop-M eration with the Smaller Manufactur-J/-

inmatnal 5,1 [ ~ N.

d u.

ers Council, a local organization with l'<':i;-c Q @ g g e d.,1py M L gi3 1,400 member companies. The pur-

'"~;.1, pose of the seminar was to inform the

!2 smaller manufacturers of advances in l

During the year, the Company began energy-saving technology, and of the W

gg a

4 offering an energy audit to residential variety of related services that are 0

4 h

o o

3 customers. For a modest $15 fee, the available to them.

1977 1978 1979 1980 1981 customer receives a thorough, basement-to-att.c home survey. At the conclusion of the survey, the homeowner is given a list if energy conservation measures.

The Light Rail Transit system's main ter.

PPG Place, a complex of gothic-style Place, which willalso include a 14-story minal-one of four downtown-will be in buildings, willprovide over one million tower, four six-story structures, a 15,000-Gateway Center. The new system wsIIrun square feet of office space for an esti-square feet Grand Plaza, and a glass-the to 5 miles from the City to South Hills mated 6,000 people. A 40-storyreflective-enclosed Winter Garden.

Wlage.

glass tower willbe the centerpiece of PPG 26t.33p y sgnweny ?*,F 9:.ig. A e; 3,

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Nucl2ar Opsrctions WOd$$[h $9['

fkW* ; i fNI I

In March 1981, the Board of Directors hylD. '

of the Company established a new 4

Wh

..m.p g.y. W Mf M O !; P /,n % % 3' Division, the Nuclear Division, and

?*a0*lsr3;?w #" % ",

M.? ~

MM/r W

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named Mr. John J. Carey, Vice Presi-M3Y ;l s

dent. The new Division was estab-ciency of the Company's nuclear

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}(((( {I'%'O

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lished to ensure the maximum effi-S.

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organization and activities through s

c/

closer management control and

'N 3 optimum utilization of personnel.

'~

i The new Division is responsible for nuclear operations, licensing, support services and engineering.

The Beaver Valley Power Station 6,

Unit No.1 (a CAPCO facility-see h.Ild.1

• )~j p%

v..

page 35) is the Company's lowest jd

,u" l,; p,

-3 fuel cost generating station. Beaver Valley Unit No.1 operated at a 74%

availability rate during 1981, well above the national average for f

nuclear power stations.

d

,,.} [I New Nuclear Construction

._ M

.t Beaver Valley Power Station Unit

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No. 2 was approximately 50% com-45 pleted at year end. Scheduled for nL, Q6 2

commercial operation in 1986, the 833,000 kilowatt unit will provide Shown is the dome setting on the reactor building of Perry Nuclear Power Plant Unit 114,454 kilowatts to the Duquesne No.1. This joi.itly-owned,1,205 MW unit is schedufed to begin commercial operation in 1984. Duquesne Light's share is 165 MW and represents the Company's next block of Light system as a 13.74% owner.

generation capacity.

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One Ox ford Centre will be a 46-story retail Steel Plaza s key element. tne Dravo The National Steel Building is located in and office structure The Oxford Centre Building willbe a 54-story tower with ovJr the First Side area between the Blvd of development involves four blocks of new 15 million square feet of off,ce space the Allies and Fort P tt Blvd it will be a i

construction between Grant and When completed in Spnng 1983. it will be mix ture of histonc preservation and r'ew Smithfield Streets the City's second-tallest office building construction i

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of a healthfulenvironment.During 1981, the Company invested $28 mil-I, _'

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enable the Company to comply with the environmental regulaiions by using a blend of low sulfur and regular Penn-CentralStation, with sts classic The Civic Arena's unique The David L. Lawrence Convention Cen.

l rotunda, may be restored and function as sliding roof was scoured ter, openedin early 1981, will soon be a major terminal for both subway and bus lastyear tolostoreits joinedby Liberty Center.

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R2taincrscocs investigation results in approval of a DMdsnd incrossa On February 20,1981, the Pennsyfva-smaller rate increase. A final decision On August 18,1981, the Company nia Public Utility Commission (PUC) on the option rate increase of $64.2 placed the Common Stock on an indi-entered a final Order regarding the million is expected earlyin 1982. cated $1.90 annual dividend rate by C "iled in April 1980. The Order granted ,ompany's $113 million rate increase raising its quarterly dividend on Com-f mon Stock from 45t to 47ht per only $47.5 million of the amount share beginning with the dividend requested. The Company has filed an payable October 1,1981. appeal with respect to certain issues y ~m ' '6[4._ + ' -,%'W. 3M[NW.! raised by the final Order. On April 30, 1981, the Company filed with the PUC aM '0' ~ '.*0 i.S M P NN O .. Q ;F [.. ' Q/- ) N'~ , Egig a new rate schodule estimated to w p 7 increase annual revenues based on fp % ?

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A .j,/ *' W , Jil or about 15%. On June 29,1981 the a- ,r PUC entered an Order instituting an M W investigation into the rate request and D *I' a granting the Company the option to .F place a rate increase of approxi-mately $64.2 mi!! ion or about 10% into effect pending the outcome of the investigation if the Company reduced the requested increase to that amount. On June 30,1981 the Com-pany filt.,d a new rate schedule in dCCordance with the option granted l by the PUC. On July 17,1981 the PUC I approved the new rato schedule, thereby permitting the new rates to Heavy power loads in several high-density-population areas of Allegheny County will be become effective for service ren. relieved when the new Arsenal Substation comes on line in 1982. While the new substa-dered on and after July 15,1981 sub. tion can perform the same basic functions as a conventional substation, it requires less joct to refund with interest if the PUC land area than a substation of the same rating. The Arsenal project was the first installa-tion of this type in the Duquesne Light system. Two Chatham Center, a 16-story office Renaissance 11is more than new con. tower of grey reflective glass and off-struction. Major renovation projects white aluminum, was completed in 198 t underwayinclude the old Eiben & Irr

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Financing 4 Also,902,977 shares of Comrr on to the Company's Eruployee Rock About 54% of the Company's total Stock were issued in 1981 pursuant to Ownership Plan The aggrer, ate dollar capital expenditures of $179 million the Company's Dividend Reinvest-value of Common Stock i', sued i dunng 1981 was raised through out. ment Plan and 133,460 shares of through these plaru we, $12,706.000 side financing which included: Common Stock were issued pursuant 1 On March 24,1981 the Allegheny County Industrial Development d8 Authonty issued $50,000,000 pnncipal amount of pollution control revenue j '] o bonds to reimburse the Company for funds expended to complete air y yV pollution control facilities at the Com-pany's Phillips and Elrama Power Sta-tions The bonds have an interest rate of 12"o, and payments of pnncipal ] and interest on the bonds will be funded by the Company. The Com-d h pany received from the Authonty net j proceeds of $48 7 million from the T, ~ sale of the bonds 2 On June 25,1981, the Company '4 ' 4N essued $80,000,000 pnncipal amount of 16 o First Mortgage Bonds. Senes q due June 1,2011 Net proceeds to tt,a ( Comoany were approximately $78.7 Sq mi; lion j 3 The Compar", issued 4,100,000 shares of Common Stock on Septem~ ber 29,1981 Net proceeds to the Communicating with customers takes rrany forms Trie role of the news meces in that = Company were approximately $48 6 communication is increasing every cay Duquesne Light recognizes that fac'. and has always sinved to work with local and national media to help keep customers informed million Here an employee is being interviewed for a segment of the ABC-TV news show "20/20" featunng wt men in non traditional jobs . sm _ s _ _ ~ a,, ~ h r a ~ t, a a '.4 a*'1+ tr > l' S L f Rh ' a 1 nas ree' y[ t ! .[ L d 3:a %4 ' u e m t .c a-a ...a~a. a~ar.a v. a.,., v 'a ,c s a wa y v s a., v p-8, a m iv.me "s ~ t d 'a 'e:a :en te' fy &, a c, v, p

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i Dividind R2inv;stmInt Phn Etive bookists including tips on insula-n:wspipers, the Company's Speakers' I Tne Company's Divid:nd Rrinvast. tion, "so-it-yourself" conservation Team was actively involved in com-ment Pitn is available to holders of maisures, understsnding sisctric municating with customers. Dunng the Company's Preferred, Preference rates, and special bill payment the year the Team made 361 and Common Stock. The Plan was programs. presentations to over 15,000 mem-l ( amended in 1981 to provide a 5% in adoition to the traditional adver-bers of important civic organizations disco int from market price on Com-tising media such as direct mail and in our service area. mor: %ck purchased under the Plan. l Effectiv9 January 1,1982, the Plan was further amended to permit eligi-

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a j ble participants to elect to exclude ( ; from current income for federal -m income tax purposes up to $1,500 on j a joint return and $750 or, an individ-ual return of dividends received in the form of Common Stock under the ,l l Plan. g -I For a free Prospectus which fully k descnbes the Plan and an authonza- / l tion form for participation in the Plan. 1r ' ar-W wnte: Duquesne Light Company, ~ 5 ~ = Stockholder Relations Section, 435 Sixth Ave., Pittsburgh, Ph 15219. ~ ~ k Customer Communications O. The Company has a number of com-munications programs designed to Y - e ~ kaep the pubhc informed abcut Onergy-related matters. gC 4 In order to educate customers in of hcient energy use, the Company in Septemba the Company's Speakers' Team macts d.e:r 1,000th presentation. Formed has developed and distnbuted inform-in 1974, the volunteer Team nat presented the Company's views to over 52,000 area opinion leaders ommerce Court. a former sarehouse. is The Sheraton Inn. a 16 story 297-room i tsburgh s Gatesaw Chppe' Fleet a n becog en tenvves iebudt as a 7-story. hotel openedin 1981 is the first of sev-hae a nes doch ana mooring fast; ne,r - D 000 square-foot off,ce budding era; nes hotets planned for the downtos n Station Square area [.'g_. C I at ~ .. j g,,

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Rscord Pak Lecd F ' t - + '"N "'*>"" ~ ' ~ 75 " ~ '" " On July 9,1981, the Company expen-Q[,j l \\, enced a record peak load of 2,522,000 kilowatts which exceeded the previ-Pf i ' ' ~ ous system peak established in 1980 g'; 3 by 48.000 kilowatts or about 2% 0 g h gl I ai l 3 Q i b f a . Tm, o su - ~ [ 4 / $? I s' I h [M Duquesnt aght reached a new system [' i peak load of 2.522 000 kilowatts at g c j approomately 2 p m on July 9 The new peak is 48.000 kilowatts higher than the Company personnel are shown adjusting the abgnment of a microwave antenna Micro-previous peak and 87.000 kdosatts higher wave towers are used throughout the Company's system to provide communications than the peak load forecast for 1981 channels for protective relays. telemeter-ing. supervisory control. data processing and the Company's telephone system ( [h,In'stw L f ? a CA h' ' v'nt er feeis USe of these fue's s s reda:e the The Bruce Mans' era P.a"' t': n i ':m-tha? ura'., ' a n * < @ a 'e , M at)an-na!7 5 depennen:e On foreign Od prises (W coa bburning <f3 n,p<ee myr?wa Jymf 'v e. s a va d and help redJ:e A mertCa 'S balance poser un'!S an2 S Oper-V abe ?y e v;f'.: poser general On of payments defDI aled by the PennSylva ma Poser Compao, M \\ N f te ~ T .t= J hl! 4 - 3 A l4 ~

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St:<m HIating Emplaywas ProfAssion11 rnd Di cantinuinCS Ths number cf employ,es at yur and Suptrvisnry Emplnyms The Company's steam hnting sub-was 4,603, aboi ! 3% higher than in Most of Duquesne Light's supervisory sidiary, Allegheny County Steam 1980. During the year, about 26% of employees have spent years learn-( Heating Company, filed an applicajonour employees received additional ing their skills. In fact, the typical with the PUC in August 1981, request-training through Company-sponsored Liuquesne Light non-union employee ing approval to discontinue steam courses or ty attending local schools is 43 years old and has 18 years of heating service to the public on June or universities. 1,1982. In its application, the Steam service with the Company. Company cited, among other reasons for its action, financial problems, the continuing loss of customers, a uete-

• A riorating distnbution system and the 7

high cost of fuel. A number of steam customers have filed protests to the application. Union Relations ...,,,g'lM The Company and the international gulC l} b Brotherhood of Electrical Workers (IBEW) reached an agreement on a two-year contract effective October 1 1981. The agreement maintained the 1008 Company's relative wage position with other electric utilities. ,g 4 Employees of the Company's coal mine are represented by the United ~ h W Mine Workers of America (UMWA) and are covered by the industy-wide Bituminous Coal Wage Agreement. Aw After a 90-day strike by the UMWA, a threG-year contract was reached Electncally-powe'ed vehicles, similar to those shown, will be part of the Port Authomy y effoctive June 7,1981. of Allegheny County's new Ught Rail Transit System. The $480 million project is scheduled for completion in 1984. d Unit No 1 of the Beaver Valles Power Sta-Unit No 2. now under construction, os These stations. Bruce Mansfield and Bea-t on t rightI attained an asatlability rate of expected to go on-line in 1986 Both ver Valley arejointly-owned by members i 74 percent in 1981--considerably higher nuclear generating units are operated by of the Central Area Power Coordination than the natonalaverage of 67 percent Duquesne Light. (CAPCO) group l &A

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Camp:ny R:p3rt cn independent c:rtified public accountants, whose -. _ St_t m nt3 appointment w!s approved at th) 1981 Annuil Meet-ing of stockhoiders. Their examination was made in The Company is responsible for the financial informa-accordance with generally accepted auditing stan-tion and representations contained in the financial dards and included a revi3w of the system of intemal statements and other secticos of this Annual Report. accounting controls and iests of transactions to the h The Company believes that too financial statements extent they considered necessary to provide reason-have been prepared in conformity with generally able assurance that the financial statements are not accepted accounting principles appropriate in the cir-misleading and do not contain material errors. cumstances to reflect, in all material respects, the The Board of Directors has an Audit Committee substance of events and transactions that should be composed of four non-officer directors which met four included and that the other information in the Annual times in 1981. The Audit Committee has the following Report is consistent with those statements. In prepar-duties and responsibilities: (1) recommend the inde-ing the financial statements, the Company makes pondent public accountants; (2) review the planned informed judgunts and estimates based on currently scope and results of their audit and other services to j available infortnation of the effects of certain events be performed; (3) review the financial statements and 1 and transactions. the related report of the independer;t public account-The Company maintains a system of internal ants; (4) review with the officers, internal auditors and accounting control designed to provide reasonable the independent public accountants the adequacy of assurance that the Company's assets are safe-the Company's system of internal accounting control, guarded and that transactions are executed and including their recommendations with respect thereto; recorded in accordance with established procedures. and (5) review the planned scope and results of the There are limits inherent in any system of intemal con-internal audit function. The independent public trol based on the recognition that the cost of such a accountants have full and free access to the Audit system should not exceed the benefits to be derived. Committee and meet with it, with and without manage-The system of internal accounting control is supported ment being present, to discuss internal accounting by written policies and guidelines and is supplemented controls, auditing and financial reporting matters. by a staff of internal auditors. The Company believes that the internal accounting control system provides Q, QQ reasonable assurance that assets are safeguarded / and finar.cial information is reliable. C. M. Atkinson John M. Arthur The accompanying consolidated financial state-Vice President Chair; nan of the Board and ments have Deen audited by Deloitte Haskins & Sells. Fiscal Chief Executive Officer Opinion of Independent Certified Public Accountants DELOITTE HASKINS & SELLS Certified Public Accountants Two Gateway Center in our opinion, such consolidated financial state-Pittsburgh, Pennsylvania 15222 ments present fairly the consolidated financial TO THE DIRECTORS AND STOCKHOLDERS p s tion of Duquesne Light Company at Decem- "Its of its opera-OF DUQUESNE LIGHT COMPANY *- tions and the changes in its hnanc. l position for ia We have examined the consolidated balance each of the three years in the period endea i sheets of Duquesne Light Company as of December 31,1981, in conformity with generally I December 31,1981 and 1980 and the related accepted accounting principles consistently statements of consolid.ted income, retained applied during the period subsequent to the earnings, capital surplus and changes in financial change, with which we concur, made as cf An-position for each of the three years in the period uary 1,1979,in the method of billing and recog-ended December 31,1981. Our examinations nizing revenues as described in Note B to the ~ were made in accordance with generally financial statements. j accepted auditing standards and, accordingly, included such tests of the accounting records gg and such Other auditing procedures as we con-sidered necessary in the circumstances. February 18,1982 14 -... - ~

Duquesne Light Compcny Statement of Consolidated income For the Three Years Ended December 31,1981 (Thousands of Donars. Except Per Share Amounts) OPERATING REVENUES: Electric...................................................... $736,015 $674,537 $611,346 Steam heating................................................ 10,832 14,928 11,194 Total Operating Revenues.............................. 796,847 689,465 622,540 OPERATING EXPENSES: Fuel........................................................ 249,547 212,672 211,939 Purchased power............................................. 16,189 18,524 10,922 Other operation............................................... 115,433 101,549 87,682 Maintenance (Note N)........................................ 64,026 61,253 52,444 Depreciatio n.................................................. 61,464 53,897 48,450 Taxes other than income taxes (Note N)......................... 58,213 48,358 47,476 Income taxes (Note H)....................................... 71,625 60,343 49,095 Total Operating Expenses........................... 636,502 556,596 508,008 OPERATING INCOM E............................... 160,% 5 132,869 114,532 OTHER INCOME: Allowance for equity funds used during construction.............. 24,579 22,374 18,852 Income taxes-credit (Note H)................................. 14,272 10,051 8,643 Other income and deductions-net............................ 2,643 3,298 1,750 Total Other Inceme.................................. 41,494 35,723 29,245 INCOME BEFORE INT" 'ARGES......... 201,839 168,592 143,777 INTEREST CHARGEL Interest on iong-term uo 97,404 80,558 69,655 Other interest........ 6,957 4,268 3,475 C Allowance for borrowed funds used during construction, net of income taxes........................................ (11,393) (9,196) (7,715) Total lnterest Charges..... 92,968 75,630 65,415 INCOME BEFORE CUMULATIVE EFFECT OF THE CHANGE IN BILLING PRACTICE....................................... 108,871 92,962 78,362 CUMULATIVE EFFECT TO JANUARY 1,1979 OF THE CHANGE IN BILLING PRACTICE, NET OF INCOME TAXES (Note B) 3,845 N ET I N CO M E.............................................. 108,871 92,962 82,207 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK.......... 22,93 23,353 23,721 EARNINGS FOR COMMON STOCK............................ S 85,895 $ 69,609 $ 58,486 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (00C}. 41,764 38,267 32,239 EARNINGS PER SHARE OF COMMON STOCK: f Before Cumulative Effect of the Change in Billing Practice......... 2.06 1.82 1.69 Cumulative Effect to January 1.1979 of the Change in Billing Practice (NoteB)........................................... .12 Total.............................................. S 2.06 1.82 1.81 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK. 1.85 1.80 1.76 The accompanying Notes to Financial Statements are an integral part of these statements. If g

Duquesne Light Co.npany Crnsolld ted Bal:nsa Sheet December 31,1981 and 1980 (Thousands of Donars) ) 1981 1980 ASSETS PROPERTY, PLANT AND EQUIPMENT: Electric plant: I n s ervice............................................................ 82,202,613 $2,120,882 Construction work in progress.......................................... 582,734 459,743 Held for future use.................................................... 825 136 Total electric plant.............................................. 2,786,172 2,580,761 Steam heating plant: I n s ervice.......................................................... 23,371 23.2fiO Construction work in progress......................................... 210 292 Total property, plant and equipment........................................ 2,809,753 RSO4,333 Less accumulated depreciation......................................... 477,009 424,653 Property, Plant and Equipment-Net............................... 2,332,744 2,179,680 OTHER PROPERTY AND INVESTMENTS: Noqutility property (at original cost less accumulated depreciation of $278 at Dect.,mber31,1981 and $269 st December 31,1980)..................... 1,565 1,574 Miscellaneous investments............................................ 275 272 Total Other Property and Investments.............................. 1,840 1,843 CURRENT ASSETS: Cash............. 3,310 2,600 Temporary cash investments (at cost which approximates market)............ 47,345 950 - ) Accounts receivable: Customers (less reserve for uncollectible accounts of $2,242 at December 31, 1981 and $2,144 at December 31,1980).............................. 71,089 69,016 Tax refund-principally investment tax credit carryback.................... 2,875 2,416 O the r........................... 20,386 13,384 Materials and supplies (generally at average cost): Coal.. 53,111 54,411 Other operating and construction..................... 30,767 27,738 Deferred f uel costs......................... 2,212 21,007 Other current assets............................. 9,788 8,736 Total Current Assets..... 240,883 200.258 DEFERRED DEBITS: Deferred costs of cancelled generating units (Note C)...................... 31,443 31,286 Deferred coal costs (Notes G and M)......... 15,669 314 Unamorti:'ed debt expense..................................... 2,970 2,556 Other d e ferred debi's................................................ 43,028 31,223 } Total Deferred Debits..... 93,110 65,379 Total.................................................... 82,668,577 $2,447,163 The accompanying Notes to Financial Statements are an integral part of these statements. _ ) 16 ~M

4 ( 1981 1980 LIABILITIES CAPITALIZATION (Note D): Common Stock (authorized-60,000.000 and 45,000,000 shares, respectively; outstanding-45,302,520 and 40,166,083 shares, respectively)............... $ 45,303 $ 40,166 Capital surplus.............................. 550,244 494,228 R etained earnings...................................................... 167,149 158,546 Total Common Stockholders' Equity............................... 762,696 692.940 Non-redeemable Preferred and Preference Stock........................... 156,137 156,137 Redeemable Preferred and Preference Stock,less sinking fund and repurchase requirements.............................................. 143,924 146,867 First mortgace bonds (less sinking fund requir?ments and current maturities) 983,870 918,230 Sinking fund debentures................................................. 10,682 10,981 Pollution control obligations............................................. 166,000 116,000 Unamortized debt discount and premium-net.......................... (9,453) (7,161) Total Capitalization............................................. 2,213p 2,033,994 CURRENT LIABILITIES: Notes payable-bank (Note E)........................................... 6,500 Notes payable-commercial paper (Note E).............................. 28,500 First mortgage bonds matuting within one year............................ 14,000 Accounts payable................................................... 80,010 66,292 Accrued federalincome tax (Notes H and l}..... 135 2,037 Other accrued taxes......... 21,499 17,102 Dehred income taxes-deferred fuel costs................................ 1,174 10,884 Accrued interest....................................... 24,342 21.005 Divide nds declared.................................................. 27,232 23,889 Sinking fund and repurchase requirements (Note D)...... 9,733 10,591 Total Current Liabilities.......................................... 178,125 186,800 DEFERRED CREDITS: Investment tax credits............................................... 109,866 98,368 Accumulated deferred income taxes.................................... 158,463 120,357 l Other def erred credits................................................ 8,267 7,644 1 Total Deferred Credits........................... 276,596 226,369 COMMITMENTS AND CONTINGENT LIABILITIES (Notes C, G, I, L, M and O) Total...................................................... $2,668,577 $2,447.163 1 ( 1 *, g, u w. m y m a s ;. w v a w. n c m v u -

Duquesne Light Company StItsmant cf Chengse in Cen:clidstad Fincncini Pacitisn For the Three Years Ended December 31,1981 (Thousands of Dollars) 1981 1980 1979 SOURCE OF FUNDS: Operations: Net income (1979 includes cumulative effect of change in billing practice of $3,845)......................................... $108,871 $ 92,962 $ 82,207 Items not affecting working capital: Depreciation.............................................. 64,170 56,737 51,428 investment tax credit deferred-net........................ 11,498 16,002 18,453 Income taxes defer 9d-net (noncurrent portion)............. 38,106 17,613 15,603 Allowar:e for equity and borrowed funds used during construction........................................... (35,97F; (31,570) (26,567) Total.............................................. 186,673 151,744 141,124 Sale of bond s............................................... 80,000 110,000 100,000 issuance of Common Stock................................... 61,332 65,309 50,730 increase (decrease) in notes payable........................... (35,000) 24,000 (23,500) Construction costs reimbursed by trustees from proceeds of pollution control financings................................. 50,000 3,223 7,375 Decrease in working capital (exclusive of current maturities of long-term debt and notes payable) (a)...................... 35,687 Total Source of Funds............... $343,005 $354,276 $311,416 APPLICATION OF FUNDS: Construction expenditures (net of allowance for equity and borrowed funds used during construction)............................. $178,942 $209,778 $197,927 Dividends on capital stock..................................... 100,268 93,188 81,343 Payment of first mortgage bonds.............................. 12,000 15,000 Sinking fund and repurchase requirements....................... 4,461 3,740 5,496 Deferred coal costs................ 15,355 314. Oth e r-n e t............................................. 15,679 7,202 11,650 increase in working capital (exclusive of current maturities of lorg.torm debt and notes payable) (a) 28,300 28,054 Tctal Application of Funds $343,005 $354,276 $311,416 (a) The components of working capital (exclusivs of current maturities of long-term debt and notes payable) were as follows: Current assets: Cash and temporary cash investments..................... $ 50,655 $ 3,550 $ 4,449 Accounts receivable....... 94,350 84,816 77,404 Materials and supplies and other current assets................. 93,666 90,885 75,528 { Deferred fuel costs........ 2,212 21,007 10,619 Total............................................. 240,883 200,258 168,000 Current liabilities: Accounts payable and accrued interest..................... 104,352 87,297 82.354 Acen sed and deferred taxes................................. 22,808 30,023 33,211 Dividends declared........................ 27,232 23,889 21,886 Sinking fund and repurchase requirements.................... 9,733 10,591 10,145 Total................ 164,125 151,800 147,596 Working capital at close of year.............................. 76,758 48,458 20,404 Working capital at beginning of year............................ 48,458 20,404 56,091 Increase (decrease) in working capital (exclusive of current maturities of long. term debt ar.d notes payable)............... $ 28,300 $ 28,054 $ (35,687) The accompanying Notes to Financial Statements are an integral part of these statements. 18 _. - -. ~ -'

Duquesne Light Company Stat:m:nt Cf C;nsolid ted R tained EcrningJ For the Three Years Ended December 31,1981 (Thousands of Douars) 1981 1980 1979 BALANCE AT BEGINNING OF YEAR: As previously reported......................................... $158,546 $158,772 $158,857 l Less settlement of prior years' income taxes (Note 1).............. 822 A s re s ta t ed................................................... 158,035 NET INCOME FOR THE YEAR.................................. 108,871 92,962 82,207 Total................................................. 267,417 251,734 240,242 DEDUCT: Cash Dividends Declared: Preferred Stock: 4 % Se rie s................................................ 1,100 1,100 1,100 3.75 % Series........................................... 281 281 281 4 M 5 % Series............................................. 291 291 291 j 4.20 % Serie s.......................................... 210 210 210 l 4.10% Series............................................ 246 246 246 { $2.10 Series.............................................. 336 336 336 J $8.S4 Series.............................................. 2,323 2,375 2,427 $7.20 Series............................................. 2,520 2,520 2.520 68.375 Series............................................. 2,512 2,512 2,512 Preference Stock: $7.50 Series............................................ 2,119 2,195 2,283 $2.75 Seri es............................................ 1,177 1,426 1,689 $2.315 Serie s........................................ 2,778 2,778 2,778 (. $2.10 Series..............................................2,520 2,520 2,520 $9.125 Series......................................... f,563 4,563 4,560 Common Stock (Per Share: 1981-$1.85; 1980-$1.80; 1979-$1.76) 77,292 69,835 57,590 Total cash dividends............................... 100,268 93,188 81,343 Loss on redemption of capital stock.............................. 127 B ALANCE AT CLOSE OF YEAR.................................$167,149 $158,546 $158,772 Statement of Consolidated Capital Surplus For the Three Years Ended December 31,1981 (Thousands of Dottars) 1981 1980 1979 BALANCE AT BEGINNING OF YEAR............................. $494,228 $433,984 $387,185 Premium on common stock issued............................... 56,196 60,693 46,930 Expense of issuing capital stock (debit)....................... (180) (449) (131) BALANCE AT CLOSE OF YEAR.................................. $550,244 $494,228 $433,984 The accompanying Notes to Financial Statements are an integral part of these statements. 19 -. ~

Not:s tD Fin ^ncia: steam neat;ng subsidiary s property arm made on vari-Stat:ments ous bases such as tons cf coal mined for coal properties. A.

SUMMARY

OF ACCOUNTING POLICIES: Income Taxes ConsoHdation Deferred income taxes are provided principally for dif-g The consoiidated financial statements include the ferences between depreciation for income tax pur-Company and its wholly-owned steam heating poses and depreciation for accounting purposes to subsidiary. the extent permitted by the Pennsylvania Public Utility Commission for rate-making purposes, and for fuel Property, Plant and Equipment and cancellation costs deferred for accounting pur-The properties of the Company and its subsidiary are poses but deducted currently for income tax pur-4 i carried at original cost. The Company's properties, I with minor exceptions, are subject to a first mortgage ~ poses. In compliance with regulatory accounting, income taxes are allocated between operating i i lien. All maintenance and repairs and replacements of expenses and other income, principally with respect minor units of property are charged to income. to interest charges related to construction work in Roplacements of retirement units of property and progress. Investment tax credits are deferred and betterments are charged to property. In connection amortized over the lives of the related facilities. with retirements, reserves are charged with tha carry-Deferred Fuel Costs {j ing value, plus dismantling charges, less salvage, of property retired. The Company defers the difference between actual fuel costs and base fuel costs until the period in which Revenues such costs are billed to its customers through its Customer meters are read monthly or bimonthly and energy cost rate. Effective May 1,1981, the energy y bills are rendered on a monthly basis. Revenues are clause was revised from a historical cost basis to a 3 recorded when billed. projected cost basis, with provisions for subsequent Allowance for Funds Used During Construction adjustments to actual cost. This change reduced the I in accordance with the uniform system of accounts time lag in the recovery of energy costs through reve-prescribed by regulatory authorities, an allowance for nues that existed in the previous net energy clause funds used during construction (AFC) is included in and significant y reduced deferred fuel costs. construction work in progress and credited to other Nuclear FuelCosts income for AFC attributable to equity funds and to The Compaay's share of nuclear fuel costs under a interest charges for AFC attributable to borrowed g funds, net of income taxes. AFC is a non-cash item non-capitalized financing lease agreement is charged to fuel expense based on the quantity of electric and is computed using a composite rate, which is energy generated and reflects a zero net salvage applied to the balance of construction work in pro-value for the leased auclear fuel. Since regulatory gress and assumes that funds used for construction authorities have not determined whether spent fuel are provided by borrowings and by preferred, prefer-may be reprocessed, and therefore it may be nec-ence and common stock equity. The rate was 7.6%, essary to store spent fuel for ao indefinite period, no 7.4% and 7.0% compounded semi-annually in 1981, provision for final disposition costs of such fuel has 1980 and 1979, respectively. This accounting proce-been made. dure results in the inclusion in property, plant and equipment of amounts considered by regulatory Debt Discount, Premium and Expense authorities as appropriate costs for the purpose of Debt discount or premium and related expenses are establishing rates for utility charges to customers. amortized over the lives of the issues to which they ertain. Depreciation Reclassifications The Company provides for depreciation of electric plant, exclusive of coal properties, on a straight-line Certain minor reclassifications have been made to basis determined in a manner consistent with applica-amounts reported in the 1980 Consolidated Dalance ble Pennsylvania law and with methods ?pplied by the Sheet to conform to the presentation used for 1981. Pennsylvania Public Utility Commission in the determi-B. CHANGE IN BILLING PRACTICE: nation of depreciation in rate proceed:ngs. The Com-Pursuant to an order by the Pennsylvania Public pany provides for decontamination eld dismantling Utility Commission, the Company changed its method costs for the Beaver Valley No.1 nGlear generating of billing end recognizing revenues for residential and ur.h on a straight-line basis over the life of the unit. certain commercial customers from a quarterly to a Such costs are currently estimated to be approxi-monthly basis, effective January 1,1979. The mately $30,000,000. The Company deposits certain $3,845,000 cumulative effect of the change on pnor ( revenues in a trust fund which has been established to years (after reduction for income taxes of $7,353,000) pay for such costs. At December 31,1981, $874,000 is included in income for the year ended December 31, t ins included in this fund. Provisions for depreciation 1979. The additional effect of the change on the year and depletion of other Company property and the ended December 31,1979 was not significant. 20

C. CANCELLATION OF CAPCO could be substantial. No termination c:sts havs been CENERATING UNITS: recorded at December 31,1981 as the CAPCO compa-In J nuary 1980, the Company rnd the Cther CAPCO nies have available to them and intend to assert legal I companies cancelled the construction of four nuclear claims and defenses. If any termination costs are l generating units. The Company's share of the accu-incurred, the Company would seek approval from the mulated construction costs applicable to these units Pennsylvania Public Utility Commission to recover was $31,443,000 as of December 31,1981. The Com-such costs from its customers over a 10-year period. pany has received approval from the Federal Energy if the Company is denied the right to recover these Regulatory Commission to defer and amortize the costs from its customers it would charge such costs to accumulated construction costs over a 10-year period income in the year of disallowance. The Company beginning with the recovery of such costs from its believes that recovery of all such costs from its cus-customers. The Pennsylvania Public Utility Commis-tomers is proper, and that final resolution of the sion has not yet decided whether !.' approve such accumulated construction costs and the termination recovery. costs will not have a material adverse effect on the Claims related to the termination of associated con-Company's financial position. tracts have been filed, for which the Company's share D. CAPITALIZATION: December 31,1981 December 31,1980 Capital Stock. Shares Shares Outstanding Amount Outstanding Amount Common Stock-$1 par value (1)............... 45,302,520 $ 45,302,520 40,166,083 $ 40,166,083 Capital Surplus: nremium on Common Stock............. $556,598,987 $500,403,359 Capital stock expense (debit)............... (6,607,112) (6,406,437) Other........ 252,261 231,016 Totai capital surplus.... $550,244,136 $494.227,938 Non-redeemable Preferred and Preference Stock: Preferred Stock-$50 par value (cumulative) (1) 4 % Series (2)............... 549,969 $ 27,498,450 549,969 $ 27,498,450 3.75% Series (2). 150,000 7,500,000 150,000 7,500,000 4.15% Series (2)........... 140,000 7,000,000 140,000 7,000,000 4.20% Series (2)........... 100,000 5,000,000 100,000 5,000,000 4.10% Series (2). 120,000 6,000,000 120,000 6,000,000 $2.10 Series (2)... 160,000 8,000,000 160,000 8,000,000 $7.20 Series (3) 350,000 17,500,000 350,000 17,500,000 Preference Stock-$1 par value (cumulative) (1) $2.315 Series (4). 1,200,000 1,200,000 1,200,000 1,200,000 $2.10 Series (4) 1,200,000 1,200,000 1,200,000 1,200,000 8C,898,450 80,898,450 Premium on Non-redeemable Preferred and Preference Stock..................... 75,238,760 75,238,760 Non-redeemable Preferred and Preference Stock.............. $156,137,210 $156,137,210 Involuntary liquidation value. $155,998,450 $155,998,450 Redeemable Preferred and Preference Stock: Preferred Stock-$50 par value (cumulative) (1) $8.04 Series (3) 268,872 8 13,443,600 274,872 $ 13,743,600 $8.375 Series (3).. 300,000 15,000,000 300,000 15,000,000 Preference Stock-$1 par value (cumulative) (1) $7.50 Series (3). 280,120 280,120 289,800 289,800 l $2.75 Series (4)....... 385,100 385,100 488,850 488,850 l $9.125 Series (3).......................... 500,000 500,000 500,000 500,000 29,608,820 30,022,250 Premium on Redeemable Preferred and Preference Stock Repurchase and Sinking Fund Requirements..... 114,917,880 118,666,200 (602,500) (1,821.250) ( Redeemable Preferred and Preference Stock.. $143,924,200 $146,867,200 involuntary liquidation value................. $143,924,200 5,146,867,200 (1) Authonzed shares: Cornrnon Stock--60,000.000 and 45.000.000 (2) $50 per share involuntary hquidation value. shares, respectively; Preferred Stock-4.000.000; and (3) $100 per share involuntary hquidation value. Preference Stock-4.000.000. (4) $25 per share involuntary hquidation value. 2

t The followmg summary indicates the changes in the number of shares of Common Stock outstanding during 1981,1980cnd 1979: Year Ended December 31, 1981 1980 1979 h Common Stock:- Shares outstanding at beginning of year................... 40,166,083 35,550,000 31,750,000 issuances: I _ Common Stock sales................................. 4,100,000 4,000,000 3,800,000 Dmdend Reinvestment Plan........................... 902,977 446,172 Employee Stock Ownership Plan....................... 133,480 160,911 Shares outstanding at end of year....................... 45,302,520 40,166,083 35,550,000 The number of shares reserved at December 31, thereafter; $9.125-not redeemable prior to January 1, 1981 for issuance under the Dividend Reinvestment 1989 through certain refunding operations, otherwise Plan and the Employee Stock Ownership Plan are redeemable at $100 plus the applicable redemption 2,850,851 and 696,629, respectively. premium decreasing from $7.68 in 1982 to $.48 in 1998. The outstanding Preference Stock of the Company The outstanding Preferred Stock of the Company is is callable on not less than thirty days' notice at the callable on not less than thirty days' notice at the fol-following redemption prices plus accrued dividends: lowing redemption prices plus accrued dividends: $7.50-redeemable at $112 through April 1,1983; $105 4%-$51.50; 3.75%-$51.00; 4.15%-$51.73; 4.20%- i through April 1,1986; $103 through April 1,1989; and $51.71; 4.10%-$51.75; $2.10-$51.84; $8.64- $101 thereafter; $2.75-not redeemab!e prior to redeemable at $107 through September 30,1984; $104 August 1,1984 through certain refunding operations, through September 30,1989; and $101 thereafter; otherwise redeemable at $27.75 through July 31,1984; $7.20-redeemable at $105 through March 31,1982; $26.50 through July 31,1989; and $25.25 thereafter; $102.50 through March 31,1987; and $101 thereafter; $2.315-redeemable at $26.60 through March 31,1986; $8.375-not redeemable prior to April 1,1983 through j. $25.90 through March 31,1991; and $25.25 thereafter; certain refunding operations, otherwise redeemable at j $2.10-not redeemable prior to April 1,1982 through $112 through March 31,1988, and thereafter at $100 certain tsfunding operations, o*Mrwise redeemable at plus the applicable redemption premium decreasing $27.10 through March 31,1982; 626.40 through March from $5.03 in 1988 to $.34 in 2003. ) 31,1987; $25.70 through March 31,1992; and $25.00 Redeemable Preferred and Preference Stock: The shares cf $8.64 Preferred Stock are entitled to a The shares of $7.50 Preference Stock are entitled to non-cumulative purchase fund under which the Com-a non-cumulative purchase fund unde which the pany offers to repurchase annually up to 6,000 shares Company offers to repurchase annually at $100 per at not more than $100 per share. The shares of $8.375 share up to 4% of the number of shares originally Preferred Stock are subject to a cumulative sinking issued. The shares of $2.75 Preference Stock are sub-fund beginning with the year 1984 which will retire lect to a cumulative sinking fund which will retire 12,000 shares on April 1 in each yeer at $100 per 55,000 shares by August 1 in each year at $25 per share. The Company may on a non-cumulative basis i share. The Company may on a non-cumulative basis retire an additional 12,000 shares in each such year. retire an additional 55,000 shares in each such year. The Preferred Stock is entitled to quarterly cumulative The shares of $9.125 Preference Stock are subject to dividends. In the event that four quarterly dividends a cumulative sinking fund beginning with the year 1984 on any series of Preferred Stock are in default, the and continuing through 1997 inclusive which will retire holders of the Preferred Stock are entitled to elect a ) 33,300 shares on January 1 in each year at $100 per majority of the Board of Directors unt I all dividends in share. The Company may, on a non-cumulative basis, arrears and current dividends have been paid. retire an additional 33,300 shares in each such year, The combined aggregate sinking fund and manda. provided that the Company may not redeem through tory purchase requirements for the next five years as the exercise of this option more than an aggregate of of December 31,1981 are as follows: 150,000 shares. The Preference Stock is entitled to l' quarterly cumulative dividends except that no Year Ending Sinking Fund and Mandatory dividends may be paid if dividends on any series of the December 31, Purchase Requirements Preferred Stock are accumulated and unpaid. In the 1982 $1,902,500 event that six qua.Miy dividends on any series of 1983 3,275,000 ) Preference Stock are m default, the holders of the 1984 7.805,000 Preference Stock are entitled to elect two directors 1985 7,805,000 until all dedends in arrears have been paid. 1986 7,805,000 22

e_ ~ y The following summary irdcates the changes in the number of shares of Redeemable and Non-redeemable A Preferred and Preference Stock outstanding during 1981,1980 and 1979: Year Ended December 31, 1981 1980 1979 .x. I h Preference Stock: [ Shares outstanding at beginning of year................... 3,678,650 3,751,360 3,788,600 e' lasuances -89.125 Series............................... 85,000 6 O Purchases and redemptions -82.75 Senes................ (103,750) (61,150) (110,000) -87.50 Senes................ (9,680) (11,560) (12,240) Shares outstanding at end of year........................ 3,565,220 3,678,650 3,751,360 f Preferred Stock: Shares outstanding at beginning of year................... 2,144,841 2,150,811 2,156,841 i Purchases--$8.64 Series................................ (6,030) (6,000) (6,000) Shares outstanding al end of year........................ 2,138,841 2,144,841 2,150,841 Indebtedness: First Mortgage Bonds (amount authorized is unlimited by indenture): December 31, 1981 1980 Series due September 1,1982 (3 % % ).................................... $ 14,000,000 $ 14,000,000 Series due September 1, 1983 (3 % % ).................................... 12,000,000 12,000,000 Series due July 1, 1984 (3 % % ).......................................... 16,000,000 16,000,000 Series due April 1, 1986 (3 % % )......................................... 20,000,000 20,000,000 Series due April 1,1988 ( 3 % % ).......................................... 15,000,000 15,000,000 Series due March 1. 1989 (4 % % )........................................ 10,000,000 10,000,000 Series due February 1,1996 ( 5 % % )...................................... 25,000,000 25,000,000 Series due February 1, 1997 ( 5 % % )...................................... 25,000,000 25,000,000 Series riue February 1, 1998 (6% % )..................................... 35,000,000 35,000,000 Series due January 1,1999 ( 7 % )......................................... 30,000,000 30,000,000 l Series due July 1, 1999 (7% % ).......................................... 30,000,000 30,000,000 Series due March 1, 2000 ( 8% % )........................................ 30,000,000 30,000,000 Series due March i, 2001 (7% %)........................................ 35,000,000 35,000,000 Series due December 1, 2001 ( 7 % % ).................................... 35,000,000 35,000,000 Series due June 1, 2002 ( 7 % % )......................................... 35,000,000 35,000,000 Series due January 1, 2003 (7 % % )....................................... 40,000,000 40,000,000 Series due July 1, 2003 (7 % % ).......................................... 35,000,000 35,000,000 Series due April 1, 2004 ( 8 % % ).......................................... 45,000$0 45,000,000 Series due March 1, 2005 ( 9 % % )........................................ 50,000,000 50,000,000 L, Series due June 1, 2006 (9 % )........................................... 80,000,000 80,000,000 Series due April I, 2007 (8% %).......................................... 100,000,000 100,000,000 Series due February 1, 2009 ( 10 % % )..................................... 100,000,000 100,000,000 Series due January 1, 2010 ( 12% % )...................................... - 60,000,000 60,000,000 } Series due September 1, 2010 (14 % % )................................... 50,000,000 50,000,000 i Series due June 1, 2011 (16 % ).......................................... 80,000,000 h Total. 1,007,000,000 927,000,000 3 Less: Current maturities-Series due September 1,1982 (3% %)................. 14,000,000 Current sinking fund requirements....................................... 9,130,000 8,770,000 r h First Mortgage Bonds (less sinking fund requirements and current maturities)........................................................ 8 983,870,000 $918.230,000 5% Sinking Fund Debentures (authorized $20,000,000) due March 1,2010....... $ 10,682,000 $ 10,981,000 P h 2

Pollution Control Obligations: Serial Miturity Average or Mandatory December 31* Date of Interest Redemption Final lasuance Rate Beginning Maturity 1981 1980 September 21,1972................. 5.49 % 1983 2002 $ 24,000,000 $ 24,000,000 June 21,1973.....................,. 5.685 % 1984 2003 12,000,000 12,000,000 October 25,1973..................... 5.755 % 1984 2003 16,000,000 16,000,000 August 13,1974...................... 7.97 % 1989 2004 14,000,000 14,000,000 April 2,1975......................... 7.50 % 1993 2005 17,000,000 17,000,000 October 29,1975..................... 8.40 % 1991 2005 18,000,000 18,000,000 September 29,1976.................. 6.90 % 1994 2011 15,000,000 15,000,000 March 24,1981.................... 12.00 % 2002 2011 50,000,000 Total Pollution Control Obligations.................................. $166,000,000 $116,000,000 Sinking fund requirements and maturities for the percent of prime rate. The notes payable-bank and next five years for long-term debt outstanding as of commercial paper outstanding at December 31,1980 December 31,1981 are as follows: and 1979 had a weighted average daily interest rats of Year Ending Sinking Fund 18.61% and 12.76%, respectively. During the years December 31, Requirements Maturities ended December 31,1981,1980 and 1979 the maxi-1982 $ 9,930,000 $14,000,000 mum amount of short-term borrowings outstanding 1983 9,810,000 12,500,000 was $80,140,000, $63,500,000 and $64,500,000, the 1984 10,257,000 16,700,000 average daily short-term borrowings outstanding were 1985 10,375,000 700,000 $28,341,000, $23,408,000 and $20,993,000 and the 1986 10,200,000 20,700,000 weighted average daily interest rate applicable to such The sinking fund requirements in each year relate short-term borrowings was 17.50%,12.47% and primarily to the First Mortgage Bonds, which require-11.28%, respectively. ments may be satisfied by the certification of property additions at 166%% of the Bonds required to be F. BUSINESS SEGMENT INFORMATION: redeemed, and the pollution control obligations. The The Company operates predominantly in the electric remaining sinking fund requirement relates to the 5% utility industry. In 1981 and 1980 no one customer pro-Debentures. At December 31,1981, sinking fund vided 10% of total operating revenues. During the year requirements for the 5% Debentures had been satis, ended December 31,1979, approximately 11% of total fied for 1982 and 1983, and the 1984 sinking fund operating revenues was derived from one customer. requirement had been partially satisfied in the amount of $118,000. G. DEFERRED COAL COSTS The pollution control obligations arise from arrange. The Company and the other CAPCO companies have ments between the Company and two local industrial made long-term coal supply arrangements with development authorities whereby the construction of Quarto Mining Company (Quarto), an unaffiliated certas pollution control facilities has been financed company, to supply coror the Bruce Mansfield Units. through the sale of bonds by those authorities, and in December 1980 the Wnnsylvania Public Utility the Company is obligated to pay to the authorities Commission instituted an investigation into the rea-amounts equal to the principal of and interest on the sonableness of the cost of coal supplied by Quarto. authorities' bonds relating to such facilities. By Interim Order entered January 12,1981 the Com-The Company's Restated Articles restrict the pay-mission directed that, pending conclusion of the I ment of cash dividends on, or the purchase of,its cap-investigation or further order of the Commission, the ital stock ranking junior to its Preferred Stock. Under Company limit its recovery of the cost of Quarto coal this restriction, no retained earnings were restricted at through its energy cost rate to approximately the pre-December 31,1981. vailing market price of similar ccs! rather than the actual cost of Quarto coal. At December 31,1981 the E. SHORT-TERM BORROWING unrecovered cost of Quarto coal reflected in the Com-ARRANGEMENTS: pany's records was approximately $15.4 million. As At December 31,1981 the Company had lines of credit required by the Interim Order, the Company is defer-J l with banks totaling $75,000,000, all of which was ring the excess of the actual cost of Quarto coat over unused. At December 31,1980 and 1979 the Company the cost allowed to be recovered through its energy had lines of credit with banks tctaling $70,000,000, of cost rate until recovery of the actual cost is permitted ]1 which $63,500,000 was unused at December 31,1980, by t'e Commission. If recovery of such excess is dis-and all of which was unused at December 31,1979. allowed, the amount deferred would be charged to The range of interest rates under the lines of credit income in the year of disallowarce. Thereafter,any are from prime rate 'ess one half of one percent to 105 excess of actual t, cst over the amount pctmitted to be 24 ~ . ~. ~.. ~. - -. -.. ~ -

recovered would be charged to income on a current tions on the Company's recovery cf the cost of coal basis. Mmagement cf the Company believes that the from its W:fwick mine. The cost of Wirwick coal in costs being deferred were prudently incurred and that excess of the average market prices of similar quality the eventual outcome of the Commission's investiga-coal purchased by Pennsylvania t'alities in the open tion will not have a material effect on the Company's market may not be passed through the energy cost { financial position or results of operations. The CAPCO rate, but may be deferred and recovered to the extent companies are continuing to evaluate the economics that the cost of Warwick coal falls below such market l of the Quarto arrangements and are considering vari-price. Such deferred costs amounted to $308,000 at ous means for reducing production costs. See Note M December 31,1981. The Company expects to recover to the financial statements. these deferred costs through the energy cost rate in The Commission in its February 20,1981 Order, 1982. relating to the Company's rate request, placed restric-H. INCOME TAXES: Total income taxes in 1981,1980 and 1979 were cortprised of the following components: 1981 1980 1979 included in operating expenses: (Thousands of Dollars) Currently payable: Federal............. $19,878 $12,627 $ 9,196 State.............. 13,642 5,343 8,312 Income taxes deferred-net: Fed e ral............................................ 26,146 17,125 8,339 j State.......... (1,057) 7,582 2,440 ) Investment tax credit deferred-net........................... 13,016 17,666 20,808 Total.......................... 71,625 60,343 49,095 included in other income (income taxes-credit): Currently payable: Federal......................... (11,372) (8,007) (6,887) State................. (2,900) (2,044) (1,756) Total income tax expense............ $57,353 $50,292 $40,452 ( Taxes currently payable-federal and state... $19,248 $ 7,919 $ 8,865 Taxes deferred-net........ 25,089 24,707 10,779 investment tax credit deferred-net........... 13,016 17,666 20,808 Totalincome tax expense. $57,353 $50,292 $40,452 Total income tax expense for 1979 is exclusive of $5,890,000 federal and $1,463,000 state income taxes applica-ble to the change in billing practice. See Note B to the financial statements. Sources of income taxes deferred and the tax effects were: Excess of tax over accounting depreciation............. $12,739 $18,312 $19,171 l Fuel costs expensed on tax retum and deferred on books.. (3,062) 5.526 (4,913) l Investment tax credit carryforward recognized against income taxes deferred-net............ 16,932 (13,844) (3,088) Cancellation costs expensed on tax return and deferred on books... 81 13.894 Other. (1,601) 819 (391) Total income taxes deferred-net............... 825,089 $24,707 $10,779 Totalincome taxes were less than the amount computed by applying the statutory federalincome tax rate of 46% to income before income taxes. The reasons for this difference in each year were as follows: 1981 1980 1979 (Thousands of Dollars) Computed federal income tax at statutory rate...... $76,463 $65,897 $56,423 Increase (decrease) in taxes resulting from: Allowance for funds used during construction (16,547) (14,522) (12,221) Excess of tax over bool deprecia'hn. (566) 35 (1,116) State income taxes, net of federalincome tax benefit... 5,230 5.875 4,840 ( Amortization of deferred investment tax credits (3,690) (3,117) (2,718) Other-net........ (3,537) (3.876) (4,756) Total income ta x expense.............................. $57,353 $50,292 $40,452

1, PRIOR YEARS' INCOME TAXES: District Court. A recovery in 1979 of a major portion of The Company's income tax returns arm settled such payment resulted in a net charge to r:tained through 1970 with the exception of the percentage earnings of $822,000. The proposed additional fec' e il depletion issue discussed below. Income tax retums income taxes relating to percentage depletion fce 962 for 1971 through 1976 have been examined, the through 1972, together with interest and related state retums for 1977,1978 and 1979 are being examined income tax effect, amount to $4,523,000 after deduct-h and the 1980 return is subject to review. The Internal ing the related tax benefit of $1,780,000. The Company Revenue Service assessed deficiencies regarding the expects that the Court's decision in the 1956 through Company's computation of percentage depletion on 1961 case will serve as the basis for settlement of the coal mined for 1956 through 1961 and proposed similar proposed deficiencies related to depletion for 1962 deficiencies for 1962 through 1972, as well as certain through 1972. Management of the Company believes other issues of relatively minor importance for 1971 that the settlement of federal and state taxes will not through 1976. The Company paid the assessments significantly affect the Company's financial position or related to percentage depletion for the years 1956 results of operations. through 1961 and instituted a suit for refund in Federal J. EMPLOYEE BENEFITS: December 31 The Company and its subsidiary have trusteed retire. 19eo 1979 1978 ment plans to provide pensions for all employees, Actuarial present value of accu-except coal mine employees who are covered under a mutated plan benefits: plan admir*tered by the United Mine Workers of [',S N sig,34j $1g Stig n America.1;.,ormation conceming the plan covering Total coal mine employees is not determinable and is not s146,095 $136,870 $116,930 Net assets available for benefits included in the data below. Pension costs are funded (at market value). s107,798 $ 91,167 $ 80.406 as accrued and include amortization of prior service costs over 30 years. Pension costs charged to The Company is liable under the Federal Coal Mine expense or construction for the years ended Decem-Health and Safety Act, as amended, and similar state ber 31,1981,1980 and 1979 were $10,083,000, laws for the payment of benefits to coal mine $9,392,000 and $7,224,000, respectively. The increase employees disabled by black lung and to their survi-in pension costs in 1981 and 1980 is principally due to vors and dependents. The estimated costs of provid-a plan amendment, effective October 1,1979, which ing such benefits, including amortization of prior serv-moved forward the average salary period used in com-ice costs over the remaining estimated life of the ] puting the past service portion of benefits and the Warwick mine, are actuarially det, ermined and accrued date used in computing the future portion of benefits. on the basis of mine payroll costs and are deposited The accumulated plan benefits and net assets availa-with a trustee. Such costs were $1,524,000, $1,494,000 ble for benefits for the trusteed plans are presented as and $1,824,000 for the years ended December 31, of the December 31 benefit information dates. The 1981,1980 and 1979, respectively. At July 31,1981 (the assumed rate of return used in determining the date of the latest actuarial valuation), the urgnded actuarial present value of accumulated plan benefits prior service cost for these disability benefits was was 5% for each year. approximately $22,223,000. K. JOINTLY-OWNED GENERATING UNITS: The Company, together with other electric utilities, primarily the CAPCO companies, has an ownership interest in certain jointly-owned units. Information regarding the Company's share of such jointly-owned units as of Decem-ber 31,1981 is as follows (thousands of dollars): Company's Interest Utility Plant Accumulated Construction Work Percentage Unit in Service Depreciation in Progress Ownership Megawatts Fort Martin No.1 $ 36,372 $12,161 5 6,335 50.0 276 CAPCO Units: Eastlake No. 5. 44,770 8.801 4,130 31.2 198 Sammis No. 7.... 40,358 10,107 9,999 31.2 187 Bruce Mansfeld No.1. 72,074 10.934 188 29.3 228 Bruce Mansfield No. 2. 20,155 2,362 94 8.0 62 Bruce Mansfeld No. 3. 70,968 2,732 63 13.74 110 Bruce Mansfield Common and Shared Facihties. 55.953 8,920 3.653 Beaver Valley No.1 291,942 32,077 20,115 47.5 385 Beaver Valley No. 2 18 1 9.028 13.74 114 j Beaver Valley Common ? Facihties.. 34,928 3.012 22,540 Perry No.1. 143.248 13.74 165 Perry No. 2. 128.848 13.74 165 Total $667,538 $91.106 $479.241 26

Under terms cf the arr:ngements with the other cxpenses (fuel, maint nance end cther operation owners of such jainti/-owned units, ths Company is expenses) of the jointly-owned units is included in the required to provide its own share of financing the cost corresponding operating expenses il the Statement of such units.The Company's share of the direct of Consolidated Income C. L LEASES: M. COMMITMENTS AND CONTitlGENT LIABILITIES: Rental payments in 1981,1980 and 1979 amounted to Construction $16,361,000, $10,383,000 and $9,844,000, respectively, The Company's current estimate of construction of which $14,141,0u0, $4,772,000 and $6,049,000 were expenditures during the period ',982 through 1986 charged to operating expenses. The Company has an amounts to approximately $1.2 billion, principally undivided interest in nuclear fuel lease agreements fer related to CAPCO generating units. See Note C for three CAPCC generating units. Rental payments are information regarding accumulated construction costs made monthly during the terms of the leases based and contract terminatinn charges which could be on the amount of nuclear fuel leased and the amount incurred as a result of the cancellation of construction of nuclear fuel burned. The nuclear fuel leases may be of four CAPCO nuclear generating units. terminated by the lessees or lessors with notice as defined in the agreements or by casualty or certain Quarto Mining Company (Quarto) other contingencies, including default by the lessees. The Company and the other CAPCO companies in certain situations involving a termination, the have made long-term coal supply arrangements with lessees may be required to purchase the leased Quarto, an unaffiliated company, to supply coal for the nuclear fuel at the higher of fair market value or Bruce Mansfield Units. As part of these arrangements unamortized cost. At December 31,1981, the Com-the individual CAPCO companies are severally, and pany's share of the lessor's unamortized cost of the not jointly, guaranteeing their proportionate shares of leased nuclear fuel was $60,323,000 and the Company Quarto's debt and lease obligations incurred in con-expects to lease an additional $13,171,000 of nucl ear nection with the development, equipp.1g and opera-fuel under current leasing arrangements. The Com-tion of two mines from which the coalis supplied. At pany expects to finalize another nuclear fuel leasing December 31,1981 the Company had guaranteed the arrangement early in 1982 which will provide an addi-obligations of Quarto with respect to approximately tional $75,000,000 of financing. $56,047,000 of indebtedness and had guaranteed in 1982, the Company plans to move its corporate lease obligations relating to approximately $31,527,000 ( headquarters to One Oxford Centre under the terms of capital equipment for the mines. The Company of a twenty-year lease with options to renew for three expects that by 1984 it will have made further substan-additional five-year periods. The Co npany also has tial guarantees with respect to additional indebted-certain other buildings under lease, subject to pur-ness and leased capital equipment the amount of chase and renewal options, which will depend on the actual costs of further devel-At December 31,1981 minimum rental payments, opment of the two mines. In general,it is contem-based principally on estimated usage of nuclear fuel plated that the purchase prices to be paid for the coal under lease and building rentd, including the new to be received under the foregoing arrangements will One Oxford Centre lease, were as follows: include amounts sufficient to service the obligations (Thousands of DoHars) so guaranteed. 1982. s 16.293 Under the terms of the coal supply contracts, which 1983. 25.832 expire December 31,1999, the CAPCO companies YS: h,$ must reimburse Quarto for their share of the costs of 1986... 21.331 operating the Quarto mines, including those costs ((1y1; y.g associated with mine construction, whether or not they receive coal from Quarto. The Company's total g g payment under these contracts amounted to $28,603,000 for the year ended December 31,1981. The Company accounts for all of its leases as operat-The Company's estimate of future obligations for ing leases in accordance with the manner in which fixed costs associated with the Quarto coal supply the Company's rates have been established by the anangements am Pennsylvania Public Utility Commission. If the noncapitalized financing leases were capitalized as of December 31,1981 and 1980, property plant and 1982. s 9.156,000 equipment-net would have been increased by y;" $78,798,000 and $66,948,000, respectively, with related 1985. 8,536.000 g increases in current liabilities and long-term debt of 1986 8.329.000 M 986. 98.200 m $4,722,000 and $74,463,000, respectively, in 1981 and $5,386,000 and $61,869,000, respectively, in 1980. The The current price of Quarto coal to the CAPCO impact on net income of caoitalizing such leases in companies is based principally on the actual current each year would not be material. production costs plus amortization of certain produc-E

tion expenses which were not included in the price of. refunds. While the Company b unable 13 predict whit coal to the CAPCO companies during the develop-action the Commission may ultimat:!y taks and ment period, which ended on May 31,1980. The cur-although the amount of such refunds could be sub-rent price of Quarto coal exceeds the current prevail-stantial, the management of the Company believes ing market price of coal. See Note G to the financial that the replacement power costs were prudently statements. incurred and that the eventual outcome of this matter i will not have a material effect on the Company's finan-Beaver VPley Replacement Power cial position or results of operations. In connection with the February 20,1981 rate order, the Pennsylvania Public Utility Commission found that Rate Matters the Company had not proven that the costs of The Pennsylvania Public Utility Commission on June replacement power during a 1979 outage of Beaver 29,1981 entered an Order granting the Company the Valley Unit No.1 were prudently incurred and directed option of placing a rate increase of approximately the Commission's Bureau of Audits to address the $64.2 million into effect, of the $100.4 million requested subject in an audit and make a recommendation as to by the Company in an April 30,1981 filing with the the amount to be refunded to customers. Commission. The Order also instituted an investiga-Subsequently, the Commission granted petitions tion into the rate request. On June 30,1981, the Com-filed by the Company, the City of Pittsburgh and the pany filed a new rate schedule based on the $64.2 mil-Pennsylvania Consumer Advocate seeking reconsid-lien option which was approved by the Commission eration of the Order with re=oect to, among other and became effective for service rendered on and things, the appropriateness, amount and timing of after July 15,1981. The new rates are, however, sub-replacement power cost refunds, but did not rule on ject to refund with interest if the Commission's investi-the merits of such petitions. On November 20,1981 gation results in approving a smaller increase. Reve-the Commission ordered that further hearings be held nues of $26.8 million from this Order were recorded before an administrative law judge on the issues of the during 1981. The administrative law judge assigned to portion of the outage period for which the Company the proceeding has recommended that the $64.2 mil-would be held responsible, the amount of replacement lion increase be approved, and management believes power cost refunds allocable to such period, the that the ultimate resolution of this rate matter will not period of time over which the refunds should be made have a material adverse effect on the Company's to the Company's customers and whether the Com-financial position or results of operations. pany should be ordered to pay interest on the outage a refund and, if so, at what rate. The Order determined Other V that a refund of some amount was due the Company's The Company is involved in various other legal pro-customers and that the liability issue had been ceedings. In the opinion of management of the Com-resolved. The Company and outside counsel do not pany such legal proceedings will not have a material agree with either of these conclusions, and no provi-effect on the financial position or results of operations sion has been recorded by the Company for any such of the Company. N. SUPPLEMENTARY INCOME STATEMENT INFORMATION: Under the system of accounting followed by the Company, a portion of maintenance expenses and of Year Ended Decernber31' taxes other than payroll and income taxes represents 1981 1980 1979 amounts chrged to coal inventories. The inventory psands of Donan0 accounts are pileved and operations expense Maintenance. ....... 873,949 $72,549 $62,699 charged as the coalis used. TaInco ne"Exe"s " P Charges for depreciation ant'. morbzation of intan-Gross receipts 35,309 30,464 28,059 gible assets, royalties and advertising costs have not Property.. 12,641 11.439 11,333 been shown c the ir dividual amounts do not exceed State capital stock.... 6,313 2.846 7.033 1% of totalrevenues. O. DISPOSITION OF SUBSIDIARY: protests to the application. The Company is also The Company's wholly-owned steam heating subsidi-exploring the possibility of sale of the subsidiary's ary has experienced losses in recent years. The assets, other than certain real estate, for a nominal losses were not material in relation to the Company's amount. If approval to abandon service should be consolidated financial position or results of opera-granted or such assets sold, the unrecovered amount 1 tions. On August 19,1981 the subsidiary filed with the of the Company's investment, estimated to be h Pennsylvania Public Utility Commission an application approximately $11 million net of rated tax benefits at for approval to abandon steam heating service in mid-December 31,1981, would be charged against earn-1982. Several of the subsidiary's customers have filed ings at that time. 28 = n : : - x - - -.- - -..- ~- -

P. QUARTERLY FINANCIAL INFORMATION (Unaudited): Oper; ting Oper; ting Net Ermings Per Quarter Ended Revenues Income income Share (Thousands of Dollars) ( March 31,1980.................................... $174,023 $35,232 $25,835 $.56 June 30, 1980.................................... 160,763 30,360 20,841 .40 September 30,1980............................... 177,274 32,436 23,218 .44 December 31,1980................................ 177,405 34,841 23,067 .43 March 31,1981.................................... 192,126 37,348 24,539 .46 June 30,1981 185,814 34,747 20,980 .38 September 30,1981.............................. 215,822 45,151 32,037 .64 December 31,1981............................... 203,085 43,100 31,316 .57 Q. SUPPLEMENTARY INFORMATION TO DISCLOSE the effects that generalinflation (constant dollar) and THE EFFECTS OF CHANGING PRICES (Unaudited): changes in specific prices (current cost) have had on The following supplementary information is supplied in the Company's results of operations. The data pro-accordance with the requirements of the Statement of vided are not intended as a substitute for earnings Financial Accounting Standards No. 33, Financial reported on a historical basis, but offer some perspec-Rcporting and Changing Prices. This Statement tive of the approximate effects of inflation rather than requires adjustments to historical costs to estimate a precise measurement of these effects. STATEMENT OF lhCOME ADJUSTED FOR CHANGING PRICES For The Year Ended December 31,1981 (Thousands of Dollars) Constant Current Conventional Dollar Cost Historical Average Average g Cost 1981 Dollars 1981 Dollar _s 4. Operating revenues.................................... $796,847 $796,847 $796,847 Fuel.................................................. 249,547 249,547 249,547 Purcha sed power....................................... 16,189 16,189 16,189 Other operation and maintenance expense.................. 179,459 179,459 179,459 Depreciation expense............. 61,464 135,779 151,273 Taxes other than income taxes. 58,218 58,218 58,218 Income taxes 71,625 71.625 71,265 Interest charges...................................... 92,968 92,968 92,968 Other income and deductions--net........................ (41,494) _[41,494) (41,494) 687,976 762,291 777,425 Net income (excluding reduction of property, plant and equipment to net recoverable cost)... $108,871 $ 34,556* $ 19,422 increase in specific prices (current cost) of property, plant and equipment held during the year * *...................... $399,773 Reduction of property, plant and equipment to net recoverable cost..................................... $(121,823) (100,451) Effect of increase in general price level...................... (405,651) Excess of increase in general price level over increase in specific prices after reduction of property, plant a.7d equipment to net recoverable cost......................... (106,329) Gain from decline in purchasing power of net amounts owed.... 135,109 135,109 Net..................................................... 3 13,286 $ 28,780

• Including the reduction of property, plant and equipment to net recoverable cost, the net loss on a constant dollar basis would have been

$87.267.

• • At Decernber 31,1981, current cost of proper;/, plant and equiprnent. net of accumulated depreciation, was $4,983,362, while historical cost or

) net cost recoverable through depreciation was $2,334,309. 2 .m.

FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL EATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (in Thousands. Except Per Share Amounts) Year Ended December 31, 1981 1980 1979 1978 1977 O w Average 1981 dollars: Operathg revenues.................. $796,847 $760,982 $779,678 $798,977 $729,766 Historical cost information adjusted for generalinflation: Income before cumulative effect of accounting change (excluding reduction of property, plant and equipment to net recoverable co st ).............................. 34,556 37,082 40,156 Income per common share before cumulative effect of accounting change (after dividend requirements on preferred and preference stock)...... $.28 $.30 $.33 Net assets at year-end at net recoverable cost............................... 738,040 730,483 744,457 Current costinformation: Income before cumulative effect of accounting change (excluding reduction of property, plant and equipment to net receverable cost)... 19,422 19,143 15,572 Loss per common share before cumulative effect of accounting change (after dividend requirements on pre-ferred and preference stock)........ $(.09) $(.18) $(.44) F Excess of increase in general price level over increase in specific prices after reduction of property, plant and equipment to net recoverable cost... 106,329 189,650 216,907 Net assets at year-end at net recoverable co st......................... 738,040 730,483 744,457 Generalinformation: Gain from decline in purchasing power of net amounts owed................ 135,109 188,667 216,763 Cash dividends declared per common share................... $ 1.85 $ 1.99 $ 2.21 $ 2.40 $ 2.58 Market price per common share at year.end........................ $13.25 $13.94 $17.06 $20.56 $28.71 Average consumer price index.......... 272.4 246.8 217.5 195.4 181.5 Historical basis: Operating revenues................... $796,847 $689,465 $622,540 $573,128 $486,243 Cash dividends declared per common share............................. $ 1.85 $ 1.80 $ 1.76 $ 1.72 $ 1.72 Market price per common share at year-end $13.25 $12.63 $13.63 $14.75 $19.12 Proven and probable coal reserves at beginning of year (tons)............. 28,100 29,900 30,650 31,650 33,751 l Tons of coal mined.................... 680 875 928 699 728 Average cost pcr tan of mined coal....... $35.10 $31.14 $28.71 $30.72 $27.45 l l l l 30

Constant dollar amounts represent historical costs inflation in the current year must be reduced to net stated in terms of equal purchasing power, as meas-recoverable cost. ured by the Consumer Price Index for all Urban The Company, by holding assets such as receiv-Consumers. Current cost amounts reflect the changes ables, prepayments and inventory, sutters a loss of in specific prices of plant from the date the p! ant was purchasing power during periods of inflation because C acquired to the present, and differ from constant dol-the amount of cash received in the future for these lar amounts to the extent that specific prices have items will purchase less. Conversely, by owing mone-increased more or less rapidly than prices in general. tary liabilities, primarily long-term debt, the Company The current cost of property, plant and equipment, benefits because the payment in the future will be which includes land, land rights, intangible plant, prop-made with nominal dollars having less purchasirg erty held for future use, construction work in progress power. The Company has significant amounts of long-and nuclear fuel in process, represents the estimated term debt outstanding which will be paid back in cost of replacing existing plant assets and was primar-dollars having less purchasing power and, therefore, ily determined by indexing surviving plant by the for purposes of these calculations, has a net gain from Handy-Wnitman Index of Public Utility Construction holding monetary liabilities in excess of monetary Costs. The current cost of coal properties was deter-assets. mined by indexing coal reserves and mach:nery and As allowed by Statement 33, items in the income equipment by the Marshall-Stevens Mining and Milling statement, other than deprociation expense, were not Index. The current year's provision for depreciation adjusted. The cost of fuel used in electric production and depletion on the constant dollar and current cost was not adjusted because the effect on earnings was amounts of property, plant and equipment was deter-not material due to the relatively short turnover period mined by applying the Company's depreciation and between incurring these costs arid their recovery depletion rates to the indexed plant amounts. through the energy cost rate. Fuel inventories, the cost of fuel used in generation The regulatory process limits the amount of depreci-and purchased power have not been restated from ation expense included in the Company's revenue their historical cost in nominal dollars. Rate regulation allowance and limits utility plant in rate base to original limits the recovery of fuel and purchased power costs cost. Such amounts produce cash flows which are through the operation of adjustment clauses or inadequate to replace such property in the future or adjustments in basic rate schedules to actual costs. preserve the purchasing power of Common equity For this reason fuelinventories are effectively mone-capital previously invested. While this effect is partially tary assets. mitigated by the benefit derived from holding long-4 As prescribed in Statement 33, income taxes were term debt, the Company has a net purchasing power not adjusted. loss which is experienced by the Common share-The regulatory process limits the Company to the holder and can only be overcome by adequate rate recovery of the historical cost of service in its rates. relief. However, the Company expects that it will be Therefore, any excess of the value of plant under con-able to establish rates which will recover the stant dollars or current cost must be reduced to the increased costs of new plant when such costs are net recoverable cost, which is historical cost. The incurred. amount of this excess that accumulated as a result of i 1 l l l

Duquesne Light Cornpany Selected Fin:n ial D:ta cnd Stati2tical Summ ry (Thousands of Donars. Except Per Share Amounts) 1981 1980 1979 1978 1977 1971

SUMMARY

RESULTS OF OPERATIONS ) Residential revenues........................ 223,146 196,400 176,744 167,338 143,299 66,197 Commercial revenues..................... 243,304 209,686 185,701 173,768 147,433 62278 Industrial revenues........................ 300,066 250295 232,389 205.149 171,174 59209 Street lighting and other revenues 12,383 11,052 10.370 9,942 8286 3,965 Miscellaneous revenues....... 7,116 7,104 6,142 5,917 5,054 1,310 Total electric revenues 786,015 674,537 611,346 562,114 475,246 192,959 Steam heating revenues............. 10,832 14,928 11,194 11.014 10.997 3,751 Total operating revenuos......... 796,847 689,465 622,540 573,128 486243 196,710 Operation and maintenance expenses..... 445,195 393,998 362,987 338,922 243,223 92,468 Depreciation.. 61,464 53,897 48,450 45,660 43,185 19,170 Taxes other than income taxes........ 58,218 48,358 47,476 41,997 40,238 15,126 Income taxes..................... 57,353 50,292 40,452 37255 43,944 14,588 Interest charges, net of allowance for borrowed funds used during construction... 92,968 75,630 65,415 60,614 58,684 22,879 Other income, principally allowance for equity funds used during construction.. 27,222 25,672 20,602 17.043 16,498 7,267 Income before cumulative effect of the change in billing practice............... 108,871 92.962 78,362 65,723 67,467 39,746 Net income.. 100,871 92,962 82,207t 65,723 67,467 39,746 Dividends on Preferred and Preference Stock 22,976 23,353 23.721 18,915 16,677 5,054 Eamings for Common Stock... 85,895 69,609 58,486 46,808 50,790 34,692 Average number of common shares outstanding... 41,764 38,267 32239 31,464 29,000 15,820 Earnings per share of Common Stock, 2.06 1.82 1.81t 1.49 1.75 2.19 Dividends declared on Common Stock... 1.85 1.80 1.76 1.72 1.72 1.66 PLANT Property, plant and equipment. 2,809,753 2,604,333 2,380,805 2 201,805 2,017,774 1,085,6.+5 r Accumulated depreciation. 477,009 424,653 386,479 349,668 320,832 231,386 Net property, plant and equipment 2,332,744 2,179,680 1,994.326 1,852,137 1,696,942 854,259 TOTAL ASSETS.... 2,668,577 2,447,163 2,222,537 2,068,753 1,862.945 912,343 CAPITALIZATION Common Stock 45,303 40,166 35,550 31,750 29,000 16,650 Capital surplus 550,244 494,228 433,984 387,185 341,017 142,185 Retained eamings... 167,149 158,546 158,772 158,035 166,551 105,992 Non-redeemable Preferred and Preference Stock. 156,137 156,137 156,137 156,137 156,137 61.137 Redeemable Preferred and Preference Stock 143,924 146,867 149,998 154,572 79,062 29,985 First mortgage bonds (less sinking fund requirements and current maturities). 983,870 918,230 808,830 721,710 736,560 469,610 Sinking fund debentures. 10,682 10,981 11,436 12,358 12,436 15,189 Pollution control obligations. 166,000 116,000 116,000 116,000 116,000 Unamortized debt discount and premium-net..... (9,453) (7,161) (5,770) (4,977) (5,138) Total capitalization...... 2,213,856 2,033,994 1,864,937 1,732,770 1,632,425 840,748 tincludes cumulative effect to January 1,1979 of the change in billing practice, net of income taxes, of $3,845 or $.12 per share. RESIDENTIAL SERVICES Average use oer customer (kilowatt-hours) 5,698 5,770 5,629 5,765 5,785 5,142 Average revenue per kilowatt-hour. 7.806t 6.828t 6.3F3t 5.924t 5.094t 2.768e SALES OF ELECTRICITY (millions of kilowatt. hours) Residential.. 2,858 2,870 2,778 2,825 2,813 2,391 Commercial. 4,065 4,020 3,866 3.782 3,909 3,333 Industrial....... 6,582 6,272 6,546 5,908 6,182 4,855 Street lighting and other. 125 129 131 130 130 100 Total....... 13,630 13297 13,321 12,645 13,034 10,679 32

m..- -

1981 1980 1979 1978 1977 1971 ENERGY SUPPLY AND PRODUCTION DATA Energy supply (millionc of kilowatt-hours) Generated in system plants................ 13,914 13,485 13,884 12,252 13,798 11,151 Purchased and net interchange............ 410 541 125 1,089 (125) 232 C-Losses and company use.................. (804) (729) (688) (696) (639) (704) Total.............................. 13,630 13,297 13,321 12,645 13.034 10.679 Generating capability (thousands of kilowatts) 3,177 3,179 3,294 3,289 3,289 2,335 Peak load (thousands of kilowatts)......... 2,522 2,474 2,296 2,379 2,371 2.015 Cost of fuel per million BTU............... 159.660t 149.768t 131.779t 125.349t 100.696t 33.946t BTU per kilowatt-hour generated............. 10,931 10,811 10,924 11,031 10,855 11,204 Average production cost per kilowatt-hour. 2.354t 2.202t 1.913t 1.919t 1.393t 0.515t NUMBER OF ELECTRIC CUSTOMERS-At End of Year Residential............................ 503,044 500,466 496,005 491,698 487,474 466,099 l Commercial... 48,857 48,306 47,976 47,679 47,154 45,476 Industrial... 2,016 2,005 1,975 1,932 1,889 1,723 Street lighting and other.............. 1,713 1,725 1,746 1,747 1,768 1,821 Total............ 555,630 552,502 547,702 543,056 538,285 515.119 Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity transmission and distribution systems, for the addi-Construction tion of pollution control equipment at generating sta-During the five years ended December 31,1981 tions presently in operation and for new busin9ss gross additions to utility plant of the Company and its construction and other projects. The foregoing esti-subsidiary aggregated approximately $1,022 million, mates do not include the cost of nuclear fuel, which exclusive of $31 million of accumulated construction is expected to be leased rather than purchased. See ( j costs applicable to cancelled generating units, and Note L to the financial statements. Existing and retirements were approximately $68 million. These anticipated lease agreements are expected to be additions represented a 51 % net increase in utility plant. sufficient to finance the cost of all nuclear fuel As a result of the rate order entered on February requirements through the third quarter of 1983, and j 20,1981 by the Pennsylvania Public Utility Commis-the Company anticipates that the remaining nuclear sion, the Company reduced its original 1981 con-fuel requirements will also be leased. struction budget, exclusive of allowance for funds The amount which the Company must spend for used during construction, from approximately $223 its construction program is regularly under review million to approximately $193 million. In October 1981 and is subject to changes influenced by business the Company further reduced its 1981 construction and economic conditions and other factors, such as l budget. Construction expenditures during 1981 were escalation of labor, material and equipment costs, approximately $179 million, exclusive of allowance for rate of construction progress, the development of funds used during construction. These expenditures environmental and nuclear safety regulations, scrvice were primarily for the construction of three CAPCO reliability and system efficiencies. In addition, this generating ur.its in addition to improving and expand-review must also take into account difficulties in ing production, transmission and distribution systems obtaining rate increases sufficient to generate ade-and pollution control equipment. quate eamings, possible changes in load growth For planning purposes, the Company's current trends and, in the case of the CAPCO construction estimate of construction expenditures, exclusive of program, the ability of each of the CAPCO compa-allowance for funds used during cr'nstruction, is nies to finance its capital requirements. approximately $235, $248, $225, $250 and $225 million for each of the years 1982 through 1986, respectively. Financing These estimates include an aggregate of approxi-The Company anticipates that funds required for mately $293 million for the three jointly-owned gener-plannad construction expenditures in the next sev-ating units being constructed under the CAPCO eral years will be provided principally from the issu-g arrangements, including related transmission facili-ance of additional equity and debt securities and in ties. See Note K to the financial statements. The bal-part from cash becoming available from operations. ance of the estimated construction expenditucas is On March 24,1981, the Allegheny County Industrial for the improvement and expansion of production, Development Authority issued $50 million of pollution 33

control revenue bonds to reimburse the Company for projected cost basis, with provisions for a subse-the final porton of the cost of air pollution control quent adjustment 13 actual cost. This change facilities Ct the Company's Phillips cnd Elrima Power reduces the time lag in the recovery of energy costs Stations, The bonds have an interest rate of 12%, through revenues and thereby improves the Com-and principal and interest on such bonds are funded pany's liquidity. by the Company. On June 25,1981 the Company issued $80 million of First Mortgage Bonds with an Cancelled Generating Units interest rate of 16%. On September 29,1981 the in 1980 the CAPCO companies cancelled the con-Company issued and sold 4,100,000 shares of Com-struction of four nuclear generating units. The Com-mon Stock. Portions of the net proceeds from these pany's share of the accumulated construction costs three issues were used to pay short-term indebted-was $31.4 million at December 31,1981. The Com-ness incurred for construction purposes and the bal-pany has requested approval to amortize such costs ance was or is being applied directly to construction over a 10-year period. Additional costs may be expenditures. Outside financing provided approxi-incurred due to termination claims which have been mately 54% of the funds required for construction filed. See Note C to the financial statements. In its expenditures during 1981 and the Company currently Februa y 20,1981 rate order the Pennsylvania Public estimates that approximately 72% of funds required Utility Commission deferred a dccision on the Com-for its 1982 construction program will come from pany's request to amortize and recover the accumu-outside financing. lated construction costs from its customers pending Interim financing will be through bank borrowings the conclusion of a Commission investigation of the and sales of commercial paper. See Note E to the CAPCO construction program. financial statements. Variable market and general economic conditions may affect the Company's Deferred Coal Costs selection of financing alternatives and adversely The Commission also ordered that the Company's affect its ability to esise capital. In order to maintain Warwick mine be excluded from rate base and earnings adequate to finance construction expendi-placed restrictions on the Company's recovery of the tures and refunding requirements, the Company cost of coal from that mine. See Note G to the finan-requires rate increases sufficient to offset increased cial statements. The Company expects to recover its costs and provide a fair rate of return. Warwick coal production costs, including the balance The Restated Articles of the Company require that of production costs deferred at December 31,1981, for the issuance of Preferred Stock, eamings (after and a partial return on its investment in the mine, income taxes) availabie for interest charges be at through the energy cost rate in 1982. ~ least 1.5 times the sum of interest charges on all in December 1980 the Commission ordered an indebtedness and Preferred Stock dividend require-investigation into the reasonableness of the costs of ments. This restriction currently precludes the Com-coal supplied by Quarto Mining Company. By Interim pany from issuing Preferred Stock. There is no simi-Order entered January 12,1981 the Commission lar restriction upon the issuance of the Company's directed that the Company revert, pending comple-Preference or Common Stock. tion of the Commission's investigation, to including in its energy cost rate the approximate prevailing mar-Rate Matters ket price of similar coal rather than the actual cost of On February 20,1981 the Commission entered a Quarto coal. The Company is deferring the excess final Order regarding the Company's $113 million rate of the price of Quarto coal over market price until increase filed in April 1980. The Order granted $47.5 inclusion of the actual price of the Quarto coalin its million of which $38.8 million is reflected in the Com. Onergy cost rate is permitted by the Commissinn. If pany's 1981 revenues. inclusion is disallowed, such difference would be On April 30,1981 the Company filed with the Penn-charged to income in the year of disallowance. Such sylvania Public Utility Commission a rate schedule deferred costs amounted to approximately $15.4 mil-requesting an annualincrease of $100.4 million. On lion at December 31,1981. See Note G to the finan-June 30,1981 the Company filed a new rate sched-cial statements. The cost of Cuarto coal to be ute in accordance with an option granted by the deferred in the future cannot currently be estimated Commission for a rate increase of $64.2 million because of uncertainties related to the rate and cost annually pending the outcome of an investigation of future production and the prevailing market price into the rate request. The Company's 1981 revenues of similar coal. increased by $26.8 million as a result of the Com-pany accepting this option. See Note M to the finan-Other cial statements. A final decision on the rate order for The Economic Recovery Tax Act of 1981 provides $64.2 mi' lion is expected eart' b 1982. federal income tax incentives for eligible individuals h Effective May 1,1981 the Company's energy cost who participate in the dividend reinvestment plans of rate was changed from a historical ccst basis to a qualified public utilities. The Company's Dividend 1 34 .. _ _ _ _ _ _ _.. ~., 5

Reinvestment Plan has been Emended in accord-the abova averrge per.'ormancs of the Braver Vallry anca with the Act to provide eligibla individual partici-Unit No.1. These incrtises in avrilibla generItion pants an election to exclude from current income for were partially offset by the United Mine Workers of federal income tax purposes for each tax year from America coal strike during the period March 27,1981 1982 through 1985 up to $750 ($1,500 for spouses to June 17,1981. Other operation expenssa ( who filo a joint return) of the dividends received in increased in 1981 compared to 1980 due to expenses the form of the Company's Common Stock under the at Bruce Mansfield Unit No. 3, the effects of inflation P6an. This provision is expected to encourage stock-and increased general and administrative expenses. holders to reinvest dividends and thereby ease the Maintenance expenses increased substantially in cash requirements of the Company. 1980 compared to 1979 due primarily to modification The Company has generated in each year funds work at the Beaver Valley Power Station, which was from operations sufficient to meet its operating required by the Nuclear Regulatory Commission (the expenses, pay dividends and finance a portion of its "NRC"), and increased distribution maintenance capital needs. The demands and commitments expenses related to storm damage. In late Decem-detailed in Note M to 'he financial statements and ber 1981 Beaver Valley Unit No.1 was removed from those noted above are not expected to materially service for an estimated period of approximately five affect the Company's ability to finance its operations months for refueling and additional NRC required or its construction program. modifications. The Company is unable to predict the nature or the cost of additional modification work Results of Operations that will be required by the NRC in future years. Operating revenues increased in the years 1979 Taxes other than income taxes increased in each through 1981 over the respective p:acedinj years, for year primarily due to increased Pennsylvania gross the following reasons: receipts taxes, which vary in direct relationship to 1981 1980 1979 revenues and, additionally, in 1979 and 1981 as a (wiions of Donars) result of increased capital stock tax expense. The General rate increases.. $ 65.6 $35.2 $25.4 effective income tax rate for the three years ended increase in electrical consumption 9.2 5.2 16 3 December 31,1981,1980 and 1979 was 35%,35%, Energy cost rate revenues 31.2 23.1 17.4 and 34%, respectively. ary uYcha g (1 2) The increases in allowance for equity and bor-p Other (.1) .9 .4 rowed funds used during construction (AFC) were g $107.4 $66.9 549.4 primarily due to the increased cost of construction 4 and an increase in the AFC rate from 7.0% in 1979 The operating revenues of the Company are to 7.4% in 1980 and to 7.6% in 1981. Interest based on rctes authorized by the Pennsylvania Pub-expense for each of the years 1981,1980 and 1979 lic Uti'ity Cornmission. These rates are designed to was higher than the prior year amount as a result of recover the Company's operating expenses, plus a an increase,r, total short and long-term borrowings rate of return on the investment in utility rate base. and higher average interest rates. The weighteu The Company also has an energy cost rate which average interest on all debt for 1981 was 8.8%, com-allows it to recover the difference between actual pared with 7.8% in 1980 and 7.6% in 1979. The fuel costs and fuel costs included in base rates. increases in total borrowings were due to the issu-Operating expenses, other than income taxes, ance of additional debt to finance the Company's have increased substantially in all three years and capital expenditures. continuing increases are expected in the cost of coal Eamings for Commo: Stock and earnings per and oil and cther operating expenses due to inflation share in 1979 include $3.8 million and $.12 per share, and higher depreciation expense resulting from respectively, as a result of a nonrecurring change in increases in utility plant and increased depreciation billing practice. See Note B to the financial state-rates. In September 1980, the CAPCO companies ments. Earnings per share of Common Stock for placed Mansfield Unit No. 3 in full commercial opera-1981,1980 and 1979 were adversely affected by tien, which increased the various operating expenses increases in the average number of shares outstand-in 1981. Additionally, fuel expense increased ir' 1981 ing, which reduced earnings per share by $.18, $.34 compared to 1980 due primarily to increased gei, era-and $.05, respectively. tion, higher fuel costs and increases in deferred The Company has prepared information on the energy expense. Purchased power expense effects of inflation and changing prices in accord-decreased in 1981 compared to 1980 due primarily to ance with the Financial Accounting Standards increased sales of power to other utilities, the avail-Board's Statement No. 33. Such information is in ability of Mansfield Unit No. 3 as noted above and Note O to the financial statements. C 35

Eusiness CImpany Offi:cra M:n:g:m:nt Cf thJ CImp:ny John M. Arthur Changes Chairrnanof theBoardandChief Duquesne Light Companyis engaged Executive Offcer New Divisions principally in the production, trans-Stanley G. Schaffer On March 24,1981, the Board of mission, distribution and sale of elec-President Directors authorized the formation o tric energy.The Company serves an Charles M. Atkinson a new Nuclear Division and elected area of approximately 800 square Vice President--Fiscal John J. Carey as Vice President-milesin Aliegheny and Beaver Coun-Roger D. Beck Nuclear. This new D! vision is respon-ties. This area, which includes the City Vice President-Engineenng & Construction sible for nuclear operations, nuclear i of Pittsburgh,is locatedin South-John J. Carey safety and licensing, nuclear support western Pennsylvania and has a pop-Vice President-Nuclear services and nuclear engineering, ulation of about 1,430,000. Allegheny Clifford N. Dunn On December 22,1981, the Board County Steam Heating Company, a Vice President-Operations of Directors authorized the formation wholly-owned subsidiary of Duquesne William F. Gilfillan, Jr. of a new Nuc! ear Construction Divi-Light Company, provides steam heat-Vice President-Custorner Service. sion and elected EarlJ.Woolever the ing service in the principal business George 1. Rifendifer Vice President. This new Divisionis sectionof theCityof Pittsburgh. Vice President-General Services responsible for the construction of The executive offices of EarlJ. Woolever Beaver Valley Unit No. 2. e President-Nu lear construction Duquesne Light Company New Vice President arts located at James O. Ellenberger Controw At the January 1982 meeting of the 435 Sixth Avenue, Board of Directors, Roger D. Beck Pittsburgh, Pennsylvania 15219. Ronald G. Males Treasurer was elected Vice President-Duquesne Light Companyis an Thomas Welfer, Jr. Engineering and Construction. Mr. Beck succeeded EarlJ. Woolever. Equal Opportunity Employer. Since joining the Companyin 1962, Rh J. . ra g tan T, Mr. Beck has worked in the Engineer-Lawrence P. Galie ng ad Consyn N,sm, Cus-Assistant Treasurer tomer Services Division and the Pub-i Joan S. Senchyshyn li inf rmation Department. Assistant Secretary New Officers 1 addition,four other employees Duquesne Light Company Service Area ~re elected officers in 1981 by the ( Board of Directors. Theyinclude James O. EllenbergW, Controller; Ronald G. Males, Treasurer; Richard J. Ciora, Assistant Treasurer; and Lawrence P. Galie, Assistant LAWRENCE Treasurer. 5 1971-1981 Dimensions !,,,) jA~s1Ro~c Magazine ^'*

• 1, 4,y In mid. year 1982, the Company plans I

to publish Duquesne Light Dimen-g sions conta,ning in-depth information "r i m amen I concerning the Company. Dimensions g W llinClude an 11-year statistical d, *y_, PENNSYLVANIA % review and discussion of some of the a% N I important issues affecting Duquesne ~ Light Company. For a copy of Dimen-l westuonttANo I g sions write: 5 WASWNGioN Duquesne Light Company g Public Information Department

1. o 435 Sixth Avenue Pittsburgh, PA 15219 rArcirt cactNe 4

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CAPCO HIGH/ LOW COMMON STOCK in 1967, Duquesne Light joined with

8 four other electric utilities to form the Central Area Power Coordination

, ( (CAPCO) group. 3s is 15w i Prior to 1980, ten generating units { 14 % e( 13 % ' 13w 13 % 13 % 14 % were committed under the CAPCO l-o p# N arrangements which provided for joint y y ~ ~, -. *j ownership interests based on individ-o o ual requirements. Duquesne Light 12.. o

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' ' ~ shares in nine of these units. To date, ~ O 12 % 12 % 12 % o

• G3 seven are in service.The three mmaining units are to be placed in lo teso 11w Bin L11_h samt '11%~

' 11% service in 1984,1986 and 1988. 1st 2nd 3rci 4th 1st 2nd 3rd 4th Since 1980 each CAPCO company Common hrs 5een responsible for establishing "*""'******'"**"d'*" Stock Dividends generat ng capacity needs beyond i The Company has paid cash dividends if the effect would be to reduce such the jointly-owned units still under con-on its Common Stock in each year ratio to 20% or more but less than struction. Duquesne Light is now in since 1913 and on a regular quarterly 25%. No portion of the retained earn. the process of developing a program basis (January 1, April 1, July 1 and ings at Decemoer 31,1981 was to meet its future capacity October 1) in each year beginning in restricted by virtue of this provision. requirements. 1953 after becoming publicly owned. The approximate number of holders Duquesne Light Company Ouarterly dividends related to the four of Common Stock as of the February Beaver Valley # 7 Beaver Valley #2 quarters of 1980 and the first twc 26,1982 record date for the 1982 NucIw-1976 Nuclear-1986 quarters of 1981 were paid at the rate Annual Meeting was 138,000. Capacity: 810,000 KW Capacity: 833,000 KW of 45t per share. Commencing Octo-8$,",${SM,7@gw $$,"r*ef11i,4NKS ber 1,1981 the quarterly diWdend rate Annual Meetino of was increased to 47%t per share. Pennsylvania Power Company Future dividends will depend upon Stockholders uansneld #1 Mansneld #2 future eamings, the cash position of Coal-1976 CoaW1977 ( the Company, construction requirs-a a U so o p 7, gw 7 ments, rate regulation and other rete-on Tuesday, April 20,1982 in the sec. D.L. Share: 228,540 KW D.L Share: 62,400 KW vant factors. The Company currently ond floor ballroom of the Hyatt Hotel Mansfield #3 expects that dividends will continue t at Chatham Center, Pittsburgh, Coal-1980 be paid in the future. pennsylvania. Capacity: 800,000 KW Dividends may be paid an the Com-D L ownership: 13.74% D.L Share: 109,920 KW mon Stock to the extent permitted by law and as declared by the Board of Form 10-K Offer ohs s bjec if you are a holder or beneficial owner Sa m s 7 P ny,, Rest ed es of any class of the Company's stock Cgi-197g which restrict the payment of cash ate fo he 1 82 nnual Meet ng the D$a"re5*18 // e pu chase,its alstock a - Company will send you, upon request ing junior to the Preferred Stock (col-and at no charge, a copy of the Com-The Cleveland Electric lectively referred to as " junior stock pany's Annual Report on Form 10-K liluminating Company payments"). No dividends or distribu-filed with the Secunties and Perry # 7 Perry #2 tions may be made on the Common Exchange Commission for the year Nuclear-1984 Nuclear-1988 Stock if dividends or sinking or pur-1981 (includin9 a list of exhibits). All Caracity: 1,205,000 KW Capacity: 1,205,000 KW chase fund obligations on the Pre-D.L Ownership: 13.74% D.L Ownership: 13.74% ferred Stock or Preference Stock are requesta must be made in wnting to aL Share: 165,567 KW D.L. Share: 165,567 KW the Secretary, Duquesne Light Com-Eastlake #5 accumulated and unpaid. Furtner-pany,435 Sixth Avenue, Pittsburgh, Coal-1972 more,the aggregate amount of junior PA 15219. a stock payments which may be made 0L ne sh 3 in any 12-month period are in pineral D.L Share: 198,120 KW limited to (i) 50% of consolidated net Transfer Agents The Toledo Edison Company income for any period of 12 consecu-tive calendar months within the 15 and Reg. trars oavls.sesse # f is Common, Preference and y,'c*$7 ( preceding months if the effect of such 000 KW payments would be to reduce the Preferred Stock D L ownership: 0 ratio of common stock equity to total Pittsburgh National Bank, D.L Share: O capitalization to less than 20% or (ii) Pittsburgh 75% of such consolidated netincome Chemical Bank, New York

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Ohio Edison System Oho Edison Company, wth its head-Tabl2 of Contents quarters in Akron. Oho. provdes electnc Page service to about 839.000 customers in an Ohio Edison 5ystem .2 area of approximately ).500 square miles FnancalHighhghts. in central and northeastern Oho. The Presdent's Message. Company's wholly owned subsdery. FinancialRevew. Pennsylvane Power Company, wth its SystemOperatons .8 headquarters in New Castle. Pennsylvane. Electnc Rates and Regulatory provides electnc service to about 124.000 Developments .Ii customers in an area of approxrnately Fnancing. .12.15 1.500 square miles n western Pennsyfvano. Coal 5uppies .15 Based on total kkWyatt-hour sa!es, the EnvronmentalActivrtes .16 Oho Edison System is the 19th largest Power 5upply Planning. 18 investor-owned electnc system in the Customer Relatons. .19 United States, The Companes' dectnc service reaches Management Changes. .19 an estimated 2.8 millon people in 666 Employees. 19 l Officers /Drvrson Managers / communites and rural areas and suppies BoardofDrectors .20 power for resale by 26 munsopal electnc Management Report. .22 systems and 8 rural cooperatives. Also. Management's Discusson .22.23 Oho Edison partcipates n the safe pur. Selected FinancelData .24 chase and nterchange of power wth Consoldated Finanaal other electnc companes. Statements. .25-30 We own or share in the owriership of Notes to Consoldated 11 piants compnsing 44 generatng units. Fnancelstatements. .31-40 In 1981. our total system power plant Audtors' Report .40 generatng capaaty of 5.686 megawatts Consoldated Friancel ncluded 86.3 percent (4.907 megawatts) .4I s Statstics coahfred. 7.5 percent (425 megawatts) Conso! dated Operating nuclear. and 6.2 percent (354 megawatts) .42 Stanstrs o Ffred generaton. StockholderInformaton. .43 /~ b l l ABOuT THE COVER. The 502-foot cooling M f tower under construction at the Beaver a Valley Unit 2 nuclear plant in shippingport. Pennsytvania, will process 507.400 gallons of water every minute. It serves as a backgrosnt t to photographs showing three aspects of our pcwer production. (Counterclockwise. top to bottom.l Delivered by barge. tra!n or truck. the 10.1 mit!!on tons of coal burned represented 90 percent of our generation in 1981. Our plants (including ownership shares produced 24.9 bill 6on kliowatt-hours of electricity. The power produced was transmitted and distributed to customers through 32.000 miles of power lines. ] Ohio Edison's new identification symbol ar o { s appears on the cover. The design was chosen for its modern graphic appeal to reflect the j Company's progre: sive attitude toward ) g meeting the challenges of the future. i 2 ~-

Financial Highlights e S f rief Summary of Operations iNc"c5l M ( industnal Sales-274 For the Years Ended December 31 1981 1980 Change KCowatt-Hour 5 ales. 24.7 Baillon 22.4 Bilhon + 10.1 % cornrnercul sales-22< Operating Revenues 5 1.3 Billion 5 1.1 Billon + 18.4% FuelExpense $413.7 Million 5364.9 Millon + 13.4 % otne, $ources-t i c Operatingincome 5252.4 Million 5169.4 Atllon + 49.0% Allowance for Funds Used sales to Utd,tes-St Dunng Constructoi. 5127.8 Million 5106.5 Milton + 20.0% interest Expense $267.5 Million 5179.9 Millon + 48.7% ner Electrc sales-44 Irtome Before Extraordinary item $183.0 Million 5135.2 Mallon + 35.4 % Netincome $197.1 Million 5135.2 Atilon + 45.8% Net income for Common Stock. s163.9 Million. 5101.4 M4!!on +616% DISTRI8UTION OF 1981 Net interest-146 Earnings Per Common Share: INCOME DOLLAR income Before Extraordinary item $ 2.10 $ 1.52 + 38 2% other operaten and Maintenance-15e Net income for Common 5'ack. 32.30 51.52 +51.3% Employee wages and Benefits-98 Dudends Per Common Fuel Espense-294 Share $ 1.76 51.76 Drvdends-94 ( iprtaistockDrvidends. 5159.2 Million 5151.9 M2!!on +48% ocpreccton s onstructon Expenditures S568.0 Million 5 515.0 Millon + 10 3 % 8"d ^* 'taaron-7e Net Finanang ActMtes $385.6 Million 5514 6 Millon - 25.1 % Preferred and Preference Drveends-38 Retum on Average Common Retained income-3t Equry 14.6 % 9.7 % ("" sandusky 4 Lorain y Warren J ** Ak t Yocngnown T { f {u ' &'",,T}$>! f il Marlon g r '>h q W-p c,y g 3 k ~4 a-Massillon L C d c",%, PA. . c%, 3., + m an,n,,o S ringfiekt h P OHfo m J1 m SERVICE AREA Cincinnati %[ li OHIO EDISON COMPANY and Pennsylvania Power Comparty g 3

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-.{'; N Justn T. Rogers. Jr. The Companes acheved a marked improvement in 1981 The rnproved availabdity of the Beaver Vaney Power Stacon eamings. despite a depressed economy that had adverse effects also contnbuted to our results and at the same time helped hold on us and the nabon as a whole. down the cost of fuel to our customers. The BIO-megawatt Rate increases recerved dunng the year. increased sales of nuclear generating unst had an equrvalent avadabety raung of 73.6 percent in 1981-a noteworthy achevement in its sixth electrcrty, and conunued improvement in the major facets of our year of operaton. Due in part to the avadabd.ty of Beaver Valley. opera 0oris were the man contreuung factors to this acheve. o r use of more expensive od-and coahfred generaton ment. Operaung results in 1981 compared to the prevous year, decreased from 99.3 percent of total generaDon n 1980 to 90.1 show that. percent in 1981. We beleve this trend wdl contoue when o Operanng revenues increased 18.4 percent to $1.3 bmion; o Operaung ncome increased 49.0 percent to 5252.4 mdisort Beaver Valley Unrt 2 and Units I and 2 at the Perry Nuclear i Plant assume more of our generatng load after ther schedulec' j and compleDon in the mH-to late-1980s. o Earnings per share of common stock reached $2.30. an increase of 51.3 percent from the 51.52 earned in 1980. Whde 1981 was a good year overall. it was not without (Of tt= 1981 earnings, approxrnately 30 cents per share problems: represented the combined effect of the gan on the purchase in February 1981. The Pubhc Uchtes Commrsson of Oho of Company bonds and settfement of a clarned tax habdity ) (PUCOJ authonzed us to begro recoverng. through electnc rates Rate increases totakng $199 mmon on an annual basis hafped over a ten-year penod. the prehminary costs for cancened 9eneraung units. However, in July the Supreme Court of Oho to bnng our income closer to necessary levels. Also, n early ruled. in a case involving The Cleveland Electnc mumnatng 1982 Pennsylvanta Powe. began conectng rates which wdl add Company (CEl), that the PUCO could not authonze recovery of nearly $27 mmon to our annual revenue Yet, recognizing the these costs as service-related costs n retaif rate cases and an need to keep pace with inflacon, increased operatng costs. and high interest rates, we cononue our efforts to obtan rates that appeal by CEI to the U.S. Supreme Court was dened n January 1982. Soce that denial. CEI has appealed a subsequent order of cover expenses and provide a far rate of rerum to our the PUCO requinng the utsty to reduce its rates to reflect the stockholders. ApphcaDons for addrDonal rate increases now ehmriatcn of these costs. Although the ou'come of this matter pendog before the vanous regulatory commtssions total more and its effect upon the Company are sts uncertan, we face a than $l31 mdion and are detaded n the "Electnc Rates" secton possble after-tax wnteoff of about 548 mmon. or 67 cents per of this report. share of common stock, based on the average number of shares Two throgs contnbuted to our 10.1 percent increase in 1981 outstand:ng durng 1981. Whether a wnte off we occur, and if total electnc energy sales, which reached 24.7 bdlon kdowatt-so. rt, trnog. wdl depend upon a number of developments. hours Frst, whde residental sales were down O.8 percent. sales ncluding the outcome of the CEI appeal and possele future to comrreraal and industnal customers were up 2.2 percent and actons by the PUCO. l 5.0 percent. respectively. Second. with the cononued improve-As a result of the Ohio Supreme Court d.uson. we were able ment in the performance and avadab&ty of our coaffred gener. to bran. within two weeks of that deoson. a 590 mmon rate aung unrts-76.3 percent compared to 72.1 percent n 1980-increase (effective August !) after reaching agreement with all we sold $74 mmon worth of power to other electnc companes. the parmpants n wr pending rate case. All paras agreed to That gain marked the first trne snce the mid-1970s that we sold the level and the umsng cd the ncrease. The Company also more power to other uthtes than we bought for our own agreed at the insistence of one of the partes, to a hearng to I needs. determne whether there should be a management audit of th. Company. We agreed to the heanng n order to avod any delay l n recerving an immediate ncrease. However. n grantng the 4 ~. - ~

{ l increase on an emerga cy basis, the Commason ordered a in the regulatory area, whch has a dramatc ofluence on our management audit, without the heanng to whsch the partes bussness. there is evidence that government agences at both the

agreed, star and federal levels are expressng concern for our industry's The Commsson selected Cresap. McCormck and Paget. Inc.

fnancial heam The concern s apparent o mcent decssms by -a nationally recognized management consulting frm-to the N. incW a W msponse to w mgency rate conduct an audtt of management and operatons. ncmase W h ganung d @ ram mturn m common equity investment. whch are essential to a utday's The audit, whch began in January 1982, is neanng compie-economic stabdity; posstie acceptance of a future test year ton, and, accordog to the PUCO. we can expect a fnal report concept in settng electnc rates whch would more accurately with recv-c datons later ths spnng or earfy summer. We reflect the real costs of provdog electnc serwce dunng the penod dl. of course, make maximum use of any recommendatons that the rates are in effect and a ruhng that Ohio's electnc { dhch wdl benefit the Company and its stockhoiders, employees utdites should not be drawn into the socal werare programs ~ and customers. through the estabhshment of so caned lifehne** electnc rates. Management audits are not new to us. In the md-1970s we Along with these encouragog developments, much of our hired an outsde consu!Dng firm to conduct a management audit opomism les in the contnbutons of our employees. They of Ohio Edison. While the firm dd recommend changes which continue to perform in an outstandog manner, as evderced by we implemented, on the whole they found that our mana9e-the sgn(cant improvement in our sales to other utshtes. Ther ment compared very weg wrth other utdates, but that economc skdl and ingenuity, however, touch au aspects of our operaDons. and regulatory obstacles already at work could cause problems for aR electnc companes in the future. Their findogs were We hope you share our pride in what the employtes have obwo@ m target. accomphshed. Yet, whsle those accOTpornia a have been sgn(cant, they would not have been possbie without your The current busness chmate is one of those obstacles causing urdawrd g and support, which is sancerely apprecated. a lower-than-forecasted rise in electnc sa'cs to customers, especally the auto and steel industres. We beleve, however, that when the economy recovers, we WWI benefit from the increased use of new and recently expanded auto and steel manufactunng facdttes in our service areas. Major industnal E projects already underway in our service areas could. by the erd of 1982, ircrease our annual operatng revenues by some 528 mdion. In addruon, we antcipate greater use of electnary in industnal processes as the decontrol of oil and the expected decontrol of natural gas restnct the use of those fossil fuels. Justn T. Rogers. Jr. A winding down of our plant and envronmental construction & 1982 programs should also improve our financial future. Although we will need about $2.9 bdison in capital dunng the next frve years. 1982 wdl be our peak year in experdstures at 5726 mdhort with a tapenng off in the years that folkWV. By 1985 our plant mstructon program wdl be Irnited to two nuclear unsts ..heduled for cvrip6 ni in 1986 and 1988. At that trre, our major construcDon prcgrams should be behind us untd we are weg into the 1990s. 5

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• Q Financial Review by $115.8 mdion. or 12.7 mrcent from the 1982 through 1986. The frve year penod 1980 amount of $911.5 mdlion.

reflects substantal expendrtures for three The purchase of fuel needed to generate nuclear generating units schedt'ed for electnary contnued to be our largest oper-compienon between 1984 and 1988. and atng expenditure, accountng for 32 cents a large envronmental program schedu for completion in 1984. A sgnificant of every revenue donar recerved n 1981. These costs totaled 5413.7 mmon-a 13.4 portion of funds for these projects has ano percent ricrease over 1980. will come from the sale of secuntes. Net costs of power purchased and inter-Interest and Di/idends changed : exchanged with other electnc companes) reflected an expense of $29.3 Net interest and other charges incn ad mmon n 1981. up 12.4 percent from 526.1 52.7 percent to $200.2 mmon n 1981, i mdlon in 1980 pnmanly because more compared to $131.1 mdlon n 1980. power was deltvered to other utdites as because of increased long-and short term revenue sales in 1981, as opposed to inter-debt borrowng and hgh enterest rates. change sales. Preferred and preference stock dividend Other operacon and maintenance costs requirements decreased to 533.2 md.on n for 1981 increased by $210 mmon, or 7.0 1981. from 533.7 mmon in 19m because percent. to $319.3 mmon. These ncreases of sinking fund transactons and other pre-Electric Sales and Revenues resulted manly from ncreases n the cost ferred stock repurchases dunng tm year. Increase of labor, matenals and sennces. The total Net income for Common Stock Ohm Edison and Pennsyfvania Power ncrease was partefly offset however. sc d 24.7 bmon kdowatt-hours of e6ectnary because with the nTiproved avadabdtry of increases a in 1981,10.1 percent more than the our generatog plants, mantenance costs After allowance was made for payrrent amount sold n 1980. Led by a 10.6 per. were reduced by 53.7 mmon. of preferred and preference stock dividends. cent ocrease in sales to the reel ridustry, Taxes assoaated with utdtry operatons net income avadable for common stock kbvatt-hour sales to ridustnal customers ncreased to $165.1 mmon in 1981 from was $163.9 mdion. compared to $101.4 increased 5.0 percent and sales to com- $136.7 mmon in 1980. Income taxes mmon for 1980. With the November sale mercal customers increased 2.2 percent. increased by $29.2 mmon n 1981, but of 7 mmon new shares and the essuance Sales to residentei customers dechnedO8 oaneral taxes decreased by 508 mmon of 31 mmon shares through the Davidend percent from 1980 manly because of a because of a $14.4 mmon credit from the Renvestment and Stock Purcha.e Plan. the drop n home construcDon and moderate settlement of a Pennsylvane exose tax on weghted average number c' shares of temperatures that resulted n less use of gross recerpts leb&ty which had beeri common stock outstanding inicreased heanng and ar conditonng. Also, a major established n pnor years. Ten cents per dunng the year to 71.2 mmon from 66.7 ' ) iricrease in sales to other uchtes share of 1981 rarnngs resulted from the mmon n 1980. On a per share basts. contnbuted 2.0 b$on kdowatt-hours to the setdement of this tax. earnings were 52.30 in 1981. compared overall increase in sales. to SI.52 n 1980. However. 20 cents per This improvement in kilowatt-hour saes. Construction Expenditures share resulted from the Company's pur-comoineu with new rates, resulted n an Expenditures for envronmentaf. plant chase of 565 8 mmon of its outstanding 18.4 percent increase in operatng reve-and other system improvement projects frst mcwtgage bonds at market onces nues to $1.3 bmon, compared to $1.I totaled 5568.0 mmon n 1981. compared below their face value. bdton in 1980. to 5515.0 mmon n 1980. The Companes Drvidends of 44 cents per share on the currentfy esumate that constructon costs. common stock of Oho Edison Company Operaticg Expenses and Taxes ncluding nuclear fuel costs. wdl total about were declared by the Company's Board of Operatng expenses and taxes increased 5726 mi'!on in 1982 and 52.9 bmon for Directors for each quarter of 1981. Earnings and Dividends - -52.40 Top: A crane fifts the TOO-ton dome onto the r Oc. dends Per Srwe containment building of the Perry Nuclear - Erning; Per Share Plant Unit I which is 80 percent corr'ptete and scheduled for operation in 1984. Sottom Left: The Beaver Vatiey Unit 2 nuclear plant, scheduled for operation in 1986. Is f t being financed. In part by the innovative r f r -- 51.60 Ohlo Edison Energy Trust. { Bottom Right: Installation of an electrostatic { precipitator at the Edgewater Piant was part -51.20 of our construction program to meet clean air l l p i standards. for which $119.4 million was spent r I in 1981. l 4 i l i --50 80 I i t -50.40 ') r s L + e sssssssssss -- 71 72 73 74 75 76 77 78 79 80 81 6

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4 System Operations system Dispatching Center Nearing Completion The 59.1 millon System Drspatching Center. which wdl increase the operatng,_, errcency of our transmisson and ') d6tnbuton system, is scheduled for Generating Unit Availability operaton n late 1982. The structure has den canpieted and wak is conowng n Our mapr commitment to improvng PP '8U " I" "*E'#on d W compute power plant performance cononued to be equipment The center.s computer wdl successful in 1981. Intensive maintenance N'd*I" **** "E "5' I" rwograms and plant desgn modifcaDons i sWem s geneatng ungs ncrease W cantnbuted signifcantfy to acheving a opeatng secway of the transtmsson generatog unit equivalent avariabdity of l 76.3 percent in 1981. This was an system. and improve generatng unst resp nse to the mnute-to-mnute changes mprowment of 4 percentage points over in customer demand for electncry. 1980 and approxmately 18 percentage points better than the same penod in 1978 Youngstown Service Center when we nicated ou gaatng une Renovation Project Finished rehability program. The improved performance enabled us to sell 97.0 A 55.1 mdfon. nine-year renovaron percent more power to other electnc project at the Youngstown Servce Center companes than in 1980. Also. our pur. was completed in 1981. The three-phase chase of power to meet customer demand project alleviated crowded conditons and represented only 7.6 percent of total sales. improved the work environment. The fu st compared to 11.0 percent n 1980. two phases were constructon of a service garage and parkng deck. plus yard Beaver Valley Unit I mprovements (complete 4n 1974) and Dunng 1981. Beaver Valiey Unit I n constructon of a storeroom and truck Shtppngport. Pennsylvania. with an avad-garage (completed n 1975) The fnal i l abdity of 73.6 percent expener'ced its best phase included renovaton of the fachtes year of performance snce it began opera-and the purchase of a buildng to house i ton n 1976. We own 52.5 percmt. or the substaton mantenance secton. i I 425 megawatts of the 810-megawatt nuciear unit which is operated cy Steam System Shut Down L Duquesne Lght Company of Pittsburgh. With approval from the PUCO. the Pennsytvania. Company closed its last steam heatng l On December 25.1981, the unit was plant on May 1.1981. The plant in i j shut down for refuehng and maintenance. Sprngfeld. Oho, was shut down because l Durng the schedu!ed 20-week shutdown, of rrsng fuel costs. a declinrng number of j further modtfcatons will be made to meet customers, and the prospect of havng to l operaung requirements which the Nuclear install costfy equpment to meet strogent Regulatory Commrsson imposed on all environmental regulatons. Steam plants n nuclear plants after the Three MJe Island Akron and Youngstown. Oho. were sold acodent in 1980. I Far Left: At the R E. Burger Plant, cosiis piled above hoppers which ernpty onto an i g underground conveyor that carries the coal Inside the plant where it is ground into /< powder, then fed into the Plant s bo!Iers. I { Ij / Left: Large hoppers of a new electrostatic ,j;,, precipitator collect more than 99 pe' cent of i M g' 4Igf &I the fly ash bom emissions at the Mes Plant. I r go i Right: The 51.3 bililon coal fired bruce g Mansfleid Plant is equipped alth the most , sophisticated environreental con

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'ric Rites and 532.7 mdlon retail rate increase request was 75 percent complete by Marcn 31. ~ Regulatory Developments fded with the Pennsylvane Pubic Utdity 1979. commisson in Aprd 1981. D Wholesale Rate Cases New Fuel Adjustment Used in January 1981, the Federal Energy in Augun. W Company changed as Regulatory Commisson (FERC) authonzed mem d d rec verng fuel cons W usng a Oho FJson to place into effect wholesale mw fuel adjunment proWe ret ued h rates which would produce an additional recent Oho legislaton. Under the new S10.6 mdlon in revenue annually. The procedum, a fW ram s coneed fa w increase. which is subject to refund, repre-months. based on a predetermined fuel con After mat psod. W hm sents part of a $13.9 mdlon request that between the amount collected for fuel was filed in June 1980 anc 6 currently being conected from the Company's 21 c sts and the actual fuel expenses e calcu-munopal customers lated and. with approval of the PUCO. 6 The Company fded an applicaton with included as an adjustment en the fuel cost FERC in November for authorcy to increase level for a subsequent six-nonth penod wholesale rates in January 1982. The Ufeline Rates Commisson has postponed the effectrve date of the increase until June 9.1982. The PUCC ruled n November that Ohio This proposed increase would produce an dectnc utunes win not be requmd to addoonal 514.2 mdlon in revenue on an 'mplement so<aned lifeine rates for annual basis, compared to rates currentfy wh ch qualifying customers pay rates below the cost of service. The Commrsson " fen $ytvane Power began conecting an Retail Rate Cases sa:d electnc utdity rates are not an appro-In rebruary. The Public Utiloes Commis' additonal $1.7 mdlon in January 1982 pnate or efficent rre hod of providing sion of Ohio (PUCO) granted a $91 mdion from its frve munopal resale customers as finanaal assistance to low-encome or i rate increase to Oho Edison. which was the resu't of a ruing by FERC on the first of elderly customers. subsequently increased to $98 muon by a two-part request made n September the PUCO. This increase was the resutt of we M War h@ NpM 1981. In the request for a tctal increase of a $ 118.1 mdlion request filed in May 1980. 523 m6on. Pennsylvane Power proposed Last fall. the PUCO perm:tted the The PUCO granted the Company an that f. at the concluson of heanngs. FERC Company to include two test perods in emergency rate increase of 590 mdlon in fnds that more than the 51.7 maion in determining its need for revenue o the (% gust after an agreement was reached add. tonal revenue is warranted. the higher January 1982 rate increase apphcaton. . ween pnnapal parties on a $139.2 rates wdl be conected annually from the The normal test year is based on actual millon retad rate increase request fded in date of the deosson. past levels of revenue and expenses for the March 1981 with the Commissor. first six morihs and on estimates for the The Company fded an apphcaton wch Construction Allowance Upheld second six months. The futu<e test year is the PUCO n January 1982 for a 9.8 A ruling by the Supreme Court of Oho based entirely on estimates for the year percent rate increase. which is expected to

• n May upheld a deoson by the PUCO after the normal test year. Use of the future become effectrve n late 1982. If granted in which anowed the Company to include test year concept should enable the the fu!! amount requested, the increase

$23.5 mdlon in constructon costs for Company to more accurately re'ect the would resu!t in approximately 5117.7 Bruce Mansfeld Unrt 3 in our rate base effects of oflaton in rts rates dunng the mdlion in add: tonal revenue annuany pror to the unit's commercel operaton. perod that tha rates are in effect. The Also en January 1982. Pennsylvane The recovery of costs (Constructon Work PUCO wdl base rts deoson on one of the Power was granted 524.9 m@on of the in Progress) was anowed because the unrt two test perods Top: substations for transmission and Kilowatt-Hour sales BAons ct Cistribution of power are an integral part of supplying adequate and reliable electric Other Kdowart-Hours servic2 to more than 960.000 customers. f Industnal B;ttom Lef t: Brighter. energy-efficient lights s na pr vide better visibility and improve camera cmrage for high school football fans at the Paul Brown Tiger stadium in Massillon. %gg _g g BItt;m Right: In downtown springfleid. Ohio. M i l m:J r renovations have occurred in the Core M I Block crea. represented by this nighttime { 6 --15 I scInc. For its new ten-story office building \\ l f (left). Credit Life Corporation is considering l econ;micar load management by shif ting from -10 gas helt during the day to electric heat during off-peak hours. -5 71 72 73 74 75 76 77 78 79 80 8I 11

Financing mdlon pnnopal amount or Poiruton Con-833-megawatt nuciear generatng unit trol Revenue Bonds. * ?81 Senes H. These being budt in Shippingport. Pennsylvar sia. seres mature in 1983 and bear interest The Company's share of the estimated at 60 percent of the floating pome rate. total construaon cost of the unit is 51.07 financial flexibdtry by deferrng a porton c in Apnl. on behalf of the Company, the bdhon. The Trust allows us to ncrease ot Ohio Air Quahty Development Authonty sold $100 mdlon of a new senes of pollu-the long-term fnancog requrements for Security Sales ton control revenue bonds. The new the project untd investment n the un,t can Dunng 1981. the Companes rarsed bonds.1981 Seres A (Oho Edson Com-be ncluded in electnc rates estabhshed by $411 mdlon in long-term capstal to finance pany Project), carry an interest rate of the regulatory commissons. a major poroon of the Companes' con-8-l/2 percent and matuce in 1984 and are By the end of 1980. 5265 md!on of the entitled to the benefit of a bank letter unst's construaon costs had been fnanced structon programs. The majonty of pro. ceeds from the sales of vanous secuntes of credit. through the Trust. In 1981. an add. tonal were appled to reduce short-term debt Proceeds from the safe of these bonds $167.5 mdlon was provded. incurred for the constructon and by each Authonty have been or s :be acquisioon of new fachtes and other used to fnance the nstal!aton of ar gene ans7erre System improvements. pol!uton control fachtes at vanous coaF Through provisons of the Economc Common Stock d pow pl nts n Oho or at the Bwce &cwery Tax Aa d W81, we m a& in November, the Company recerved Mansfield Plant in Shipongport. To raise 537.5 mdion by transfemng certan approximately 585 mdhon from the sale of Pennsytvane. tax benefits related to fao!rtes placed into seven mdhon shares of common stock at international Financing seme dunng the year. $12.125 per share. To expand our capital market oppor. The transacton enabled us to gan We also rarsed $35.9 mdlon from the tunites the Company estabhshed a sub. rnmedete benefit from ovestment tax issuance of 3.1 mdhon shares of common sdery. Oho Edson Fnance N.V., in the credts and accelerated tax deprecaton stock through our Divdend Reinvestment Netherlands Antdies (West indes). which deducons that otherwrse woud not have and Stock Purchase Plan. enables the Company to obtan funds been avadable for severalyears. Proceeds First Mort Bonds through the sale of notes to foreign inves-hom the transfer we used to reduce in June. ennsylvania Power sold $20 tors. The interest on these notes es exempt short-term loans incurred for System mdhon of bonds. This senes. at 16-l/8 per. from Untted States and Netherfands Antdies rnprwemem cent interest. wdl mature on June 1.1989. withholdng taxes The frst offenng made Securities Purchased in a pubhc offenng in September, the through the subsdery was 17-1/2 percent Company issued 575 mdlon of bonds. Guaranteed Notes n the pnnopal amount To strengthen the Company's common carrying an nterest rate of 18-3/4 percent of 575 md!cn. The sale of these notes, equity base and reduce long-term debt ar' ) and a matunty date of October I.1991. Wh'ch wdl mature in 1988. was completed preferred stock. in 1981 we purchased s in October. The Company has guaranteed some outstandng frst mortgage bond and Pollution Control Bonds the payment of pnnopal and nterest of preferred stock secuntes at poces below in January. 54.6 mdhon pnnopal those notes and has secured its guaranty their face va'ue. In total 565 8 mdhon of amount of Polluton Control Revenue with a pledge of a new seres of its Frst frst mortgage bonds were purchased. Bonds.1981 Seres G. and si md!cn Mortgage Bonds. which resulted in an extraordnary gain pnncipal amount of Envronmentaf equivalent to approxrnatety $14 md!cn. or improvement Revenue Bonds.1981 Seres Ohio Edison Energy Trust 20 cents per share of common stock. We A. were issued. on behalf of Pennsyfvania in 1980. the Ono Edson Energy Trust also purchased approximatey 27.000 Power, by the Beaver County Industnal was estabhshed to make available up to shares of our preferred stock. 5100 par Development Authonry. On behat of 5500 mdion to finance, in part. the value. further ocreasng common equity Oho Edson. the Authonty sold 514.3 constructon of Beaver varley Unit 2. an by approximatey 51.8 mahon. - - 5540.000.000 Right Inside the Nases Plant ch mney, fr e gas u New Long-Term Capital which has passed through dust conection equipment is channelec upward through ihe new 393 root structure I --5360.000.000 [ t --5270.000.000 } i r t E -$ i8a00a000 I r[ l J -5 9a00a000 e sssssssssss -- 71 72 73 74 75 76 77 78 79 80 81 12

___mm___,u_ _, _ _ l I ~n n.. fj,y*. n - ~%. ,;, ~, ' N M. -,, M ', - 4 f..- ,., 3x 9 ' d N d , Q '. I I.'$ ' '9 )$ j ~ ^%.. L'; + y y ? c: p ,f, s.,% 4, #' s s a N j s 'k* s a ,A l l y $\\ s ky Y / a \\ x 1 I \\ y g g.. 3 ,x -.( I ~ 4 'W *. ',. i-i ,g ,,Nr . ? v,r, ;>- k '2*l%?j \\ . b. j Q+v.n! ?,, I ~ 7 a ~ 4 I . f 46- .s l ~ .o ,. $:, x: yN,'. \\ ',, "e,' ~ ~ il? - s,,i3...'.'. R,.. 3J. Ol*: s..,, 1-l. W L m! ,['# w e. a 4W J ' A -4 ,,.. a. 4.. V a.'-1 cy ,, vi 3 - 7- ,I 4. ( e f-s y,, x x.. :.. L e.y, ..o 3 2, g < >( \\ ~ '3.y, ',,. z. g .c y~., }: j.y., "., ' ~~ y.; - ~ *, ' g $16 p t t w,_ C [-- W@ N$ '*' f F c 'b.. i y m s A r _ m-m- 'i "m ' da ""d ummnw j tmou=uamm... ume lllll-,h,ll, l I l ma.:.. - m.",,g x,-- = _.x = mannuman m 1 \\ m l A *

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Financing pontinued) Coal Supplies North Amencan Coal Corporaten. up to 1.2 mdlon tons of coal per year wdl be delivered through November 1982 to the R. E. Burger Plant n Shadyside. Oho. { fuclear Fuel Financing Approximately 10.1 mdlon tons of coal The coal wd! be washed aad the resuttng To provide funds for fnancing the costs were burned at our nine coaFfired power lower ash content will asst t us n meetng cf nuclear fuel, the Company ent red into plants in 1981. About half of our coal environmental regulatons it the plant. an arrangement in December involving the purchases are made through long-term This agreement resolved a lawsuit fded formaton of a special purpose corporaton contracts for suppies coming from south-by North Amentan in September 1980 unrelated to the Company. The corpora. eastern Ohio and western Pennsylvania. involving a sales agreement to purchase a tron will issue commercial paper or make The balance is purchased on the open minimum of I.6 mdlon tons of coal per t' market from the same regon and from year from two of North Amercan s south-bart borrowngs to finance tiese costs eastern Oho mines. In June 1980 we eastem Kentucky and We<t Virginia. and will lease the fuel to the Company. Pennsylvania Power buys coal from central notifed North Amencan of our intenton to and western Pennsylvania. terminate the sales agieement because the 13 mlon L ble As of D mines were not produong coa! n tne

31. 515 millon was fnanced through thrs Coal Quality improved; quantny or qualay spected n the arrangement. Pennsylvania Power expects By-Products Sold agreement.

to enter into a similar arrangement in early Also inc uded n the ag eement is a 1982 for $30 mdlon to finance its nuclear Dunng 1981. we conunued to purchase revised pnong arrangement that wcl ) fuel costs. better-quahty coal for our power plants. In g "Y add. ton to hgher heatng values, the coal 5 P b es the of Securities Ratings Lowered represented ar' approximatefy 22 percent

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g, in July, two investor services lowered decrease in ash and an 18 percent decrease br M W e ph~ l their ratngs of the Company's secuntes. n sulfur content compared to coal recerved ating the Company's finanaal conditon. in 1977. The hgher heat content of coal Quarto Coal Contract Amended hgh money costs and the contnued hgh resu!ted in hgher boder effstency, less cash demands resulung from the maintenance, and lower ash handhng To reduce overall coal costs for the Bruce costs. constructon program. Mansfeld Plant. the Cfmtral Area Power Moody's investors Service. Inc.. lowered The Company has airo contnued to Coordinaton Group (CAPCO). which raungs on our 19 series of pubhc!y held first reduce its expenditures for ash disposal by includes Oho Edrson and Pennsytvania mortgage bonds from A to Baa and fndng buyers for some of rts ash. The ash Power. reached agreement with the downgraded the ratng on six seres of can be used as a partial replacement for Quarto Mang Company to amend two j Silucon control revenue bonds from Baa portand cement n concrete and cc,ncrete coal sales contracts The amernments ( a Ba. However, their raungs on our products, in varous constructon apphca-allow CAPCO to specty tonnage require-tons such as a structural fdl or a road base preferred and preference stock remaned ments and approve mong plans 'or Baa and Ba, respectrvely. matenal, and for hghway snow and ice Quarto's three southeastern Oho coal Also. Stanc.ard and Poor's Corporaton control. The sale of coal ash in the last mines. Under the amendments less Quarto lowered our first mortgage bonds to Tnple three years totaled approximatery coal Wdi be bought enabhng CAPCO to $236.000. B-minus from Tnple B-plus. The Company's buy a greater porton of coal from more economical sources that are now avadabie polluton control revenue bonds were North American Coal downgraded to Double B-plus from Tnple in a separate agreement w.th Quarto s i B. preferred stock to Double B from Trpe B Agreement Reached parent company. the North Amencan Coal and preference stock to Double B-minus As part of an agreement reached n Corporaton. CAPCO was granted an from Double B. March between Oho Edison and the open-end opton to acqu.re Quarte Left: A barge adds 1,500 tons of coal to the ' ~ ~u 4.8 mfillon barge tons delivered in 1981 to ~ four piar ts on the Ohio River-Burger. =- Mansfield, sammis and Toronto. Right. At an underground coal mine in ~ southern Ohio, the rotating blades of i sheareng equipment mine coal which is V, l ship' sed by barge to the Bruce Mansfield Plant. ? g fjC .s. V. pf ' ' s g / 9 4 j \\- .s. p s )9 l f' A \\ I ~ l l 15

Environmental Activities such as the current "acd ran" controversy. The Coahton has commrssoned a study to determine the cost-effectiveness of current and proposed envronmentallaws and regulatons, and it has begun a seres of advertisem nts o major newspapers in the Northeast a brog focus to the issue. Air Quality Projects in Progress Retrofitting existing power plants to meet revised clean at standards wd! cost the Companes 5464 8 mdlon from 1981 tnrough 1986, with $119.4 md!cn of that amount spent n 1981 Sammis Air Quality Control Project Legislative Developments The largest ar quality contro pro,ect rs underway at t"c coaNeed W. H. Sammrs With the Cean Ar Act subject to revew Plant near Stranon. Oho. The 5450 mdlon in 1981 we were n frequent contact with prcfiect, which is pctured on thrs page. is federal legslators and ther staffs with our on schedule and planned for competon n suggestons for rnproving the Act. These AugW W81 h Noer W8L W rnprovements would decrease the com. N@Ae M W W wide and m piexites and admrustrative burdens sm-feet W W to support ponuton posed by the cur ent Act. control equrpment was completed. We are also working to discourage Constructed over a four-lart hohway, the nappropoate legsfaton directed at the so-deck wdl support six large dust collectors called "acd ran" problem in which which will replace existng equpment to preopstaton is thought. by some pe@ control particulate emtssons. A seventh to contain acdic matenals otroduced by dust conector wdl be constructed on the the chem <al transformaton of ndustnal emissons. We beleve that the level of ground ?, uth of the plant The project is about 25 percent complete. scentifc knowledge on "atd ran" is insufficent tojustify enactment of Additional Air Quality Control Projects legs!aton which could regure utilttes to in Jufy we placed nro service a 531.1 spend bdions of dol'ars on more as milion installaton of two electrostatc s poauton control with no reasonable preoprtators and a 393 foot channey a: the as'urance that the theoret cal effects of Nries Plant n Ndes. Oho At the R. E. "acd ran" would be reduced. Burger Plant in Shadysde. Ono, two A!so. we are actively partlopatng n the electrostatt preoprtators are being installed actrvites of the Coaliton for Envronmentaf for two boders at a cost c/ 545 3 mdion Energy Balance (CEEB). Made up of and are scheduled for completon n March approxrnatety 30 mdwestem utdites and 1982. Also scheduled for March 1982 other industres. CEEB is workng to completon is a 5218 mdlon etctrostatic rnprove the level of publ< and legslative preopitator at the Edgewater Plant in understanding of energy-related issues Lorain. Oho Lef t. At the R. E. Burger Plant. two electro-g,. ~~ I II, static precipitators for units 7 and 8 wiis begin ,T

f jm operation in April 1982. The f, j t

~. -. p,, f t environmental project includes a slio (f ef tl = j, k A which witiload trucks with fly ash for u J, p transportation to a landf all. .i .s ..I Right. Because of the lack of available space, a . f .' 3 - -M $28 miillon deck *r at is ten times the strength - [, N',- of a highway brio,

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Power Supply PlannMg Nuclear Plant Construction in October 1982 that plant is scheduled Proceeds to begn 18 months of tesong and demon-straton. It wdl process 600 tons of :oal per Constructon is continuing on three day for use n an exist ng 50-megawatt nuclear-powered generaang units beng plant. In helpng plants meet stnct ar pollu-fanced and budt by the frve CAPCO ton standards, the process wdl produce t companies: Ohio Edison. Pennsyfvania ash and sohd su! fur by products which wd. Power. The Cleveland Electnc !!!umnaang reg aie mansnal dsposal. Following suc-Company. The Toledo Edson Company cessful demonstraton. larger capacty plants and Duquesne Light Company-are expected to be budt by AHrs<halmers. c. Constructon that began 'a 1974 con-To date. we have mrsnbuted $2.3 tinues at the 54 bi!!cn Perry Nuclear Plant mdlon to the project with $1.5 mdlon in North Perry, Oho. which 5 being budt more scheduled through 1984. and willbe operated by The Oeveland Electric lauminaang Co npany. The System Load Management I.205-megawatt Unit I is now about 80 Program Reduces Demands percent complete and scheduled for com-Through our load management pro-mercial opertuon in May 1984. The gram, we are acDvely encouragog our I.205-megawatt Unit 2 is also progressng customers to modty ther time of ecctncat weD and is scheduled for commercel oper-use-in effect to shtt their loads to orf. aDon in May 1988. Ohc Edison and peak penods so that system peak demand Pennsylvane Power wdl own 35.24 is reduced without adversety affectng elec-percent. or 850 megawatts, of the total tnc revenues. The emphass of ths generatng capacty from these nuclear ~ogram is to either heip customers snit exstog Ms or @ to desgn new aver Valley Unit 2 at Shippingport. customer loads to operate at off-peak Pennsyfvano, which n be"9 budt and wdl penods. Shits to off-peak he!p reduce the be operated by Duquesne Light Company, is about 50 percent complete. Constructon need for costfy new generatng plants to began n May 1974 and commercel oper-meet peak demands and delay the eme when we wdl have to fnance and put aDon is scheduled for May 1986. The those facdst es oto servre. 833-megawatt unit. of which we wdl own 41.88 percent or 349 megawatts wdl cost in 1981. the program resurted in a reduc-an estmated $2.4 bd!cn. ton of 20 megawatts o average system eak demand. Over the five-year pered The pro;ected rate of growth for Coal Gasification Research Project begonog n 1977. we were aw to reduce our customers' contributon to peak customer demand is approximately 2 Along with the Alks-Chalmers Corpora-system demand by 132 megawatts. percent per year for the penod 1982 ton. the state of flhnors. and a number of Large ndustnal and commercal cus-through 1991. Wrth the three nuclear other uthtes. we are partopaDng n a tomers were pnmanty responsible for the generaung units scheduled for commercel 5135 mdlon coal gasticaton research prof results acheved. Resdental customers are operaton in the md-to late-1980s, ect at lainos Power's Wood Rrver Plant encouraged to nstall load control devices adequate generatng capacty should be near East A! ton. Ilhnors. The project is n-and change the Ome of use for major available to rneet the energy demands of tended to demonstrate the feasibdity of appiences. our customers wrth adequate reserve converting a high-su! fur coal. like that found marg ns well nto the 1990s. in Oho. to a clean-burning gaseous fuel. Power supoly Planning - - 54.200.000.000 Right: The more than 7.600 men and women who make up Ohio Edison and Pennsyfvanla Power know the importance of providing - 53.500.000.000 '"""'"h9 d'"*'"'"'"*'""d t_ hard work are the primary reason that we C Constructon Work in Progress deliver servke which is 99.9 percent reliable. Net Utihty Plant in Service -- 52.800.000.000 t i [ I 3 i p -- 52.100.000.000 f. f W - 51.400.000.000 L ~ } [ r I ui [, r - 5 700.000.000 3 ~. ~~ hhh 71 72 73 74 75 76 77 78 79 80 81 18

l l Customer Relations Management Changes Emp!nyees Customer Contact Board Members Retire 7-Ohio Edison and Pennsylvane Power Employee Programs (. rive to maintan good customer relatons. in 1982. three members of the Board of On December 1. employees were i In 1981. over 300 em Drectors wdl retre, followng a 1980 Board trainng program on "ployees attended the resoluton which makes members nehgible maded a su.ement hstng inquines and Complants." Also, meetngs for nominaton by t.ie Board d they are 69 health, l#e. and penson benefits Annually, Handhng Customer have been held with customers to help years or older. According!y. D. Bruce a samdar statement ws" be prepared and them find ways to use electroty more Mansfeld. Fred H. Zuck, and John L. maded to help maintain employee aware-j efficientty and at less cost. feudner. Jr.. wdl not be desgnated for ness of the value of benefits they recewe. The Companes have maintaned a pro-reelecton at the 19F2 Annual Meetng of in October, we estabhshed an Employee gram of monthly meetngs, through dm-Stockholders. Mr. Mansfeld. whose career Suggeston System, whsch encourages i sions, with seven customer panels of 10 with the Company spanned nearty 35 employees to submit deas for reducng i to 15 volunteers. These customer panel years. served as presdent of Oho Edrson operatry costs and rnproving productmty. Work has begun on a new 5700.000 members relay our informaton to the and Charman of the Board of Pennsytvano classroom fachty at the Employ organizarons they represent. such as Power. He is wdefy recognized for his Center in Massi!!on. Oho. The buddng. 1 senor crizens, labor, minontes and socal contrbutons to the.Wtnc utikty ndustry whsch is scheduled for 1982 compieton. service agences. In addition in 1981, and the community. Mr. Zuck. a drector wdlinclude a hgh bay area with poks i Speakers Bureaus and Customer Serva.es snce 1960. was formerly Charman of the enabhng trainees to learn chmbng skrs employees from both Companes gave Board at the Sandusig Foundry & Machine energy-related talks to 4.755 grcept wh:ch Company Mr. Feudner. Executue Drector without weath totaled 124.823 partopants. of Akron Communrty Trusts. servtd as Also, through coordnatng our manage-drector snce 1967. ment development actetes with the Universrty of Akron 545 employees Statement Billing instituted We are grateful for the long and active attended training courses desgned to servce these nwn provded. Ther leader-in August, the Company replaced rts Sh'p and wrsdom wdl be missed imp ove ther managerei effectueness postcard bills wrth statement bd:s ma: led n i envelopes Thrs new bdhng furmat wdi New Board Members Elected Affirmative Action Promoted j enable us to better meet maihng of infor-maton to customers frequently regured by At the 1981 Annual Meetng of Stock-Oho Edison is comm:tted to Equal law and regulators. and at the same trne holders n Apol. two new members were Employment Opportunity and Affrmatrve i elected to the Board: Donald C Bus:us. Acton Programs. This commitment rs ! ( orovde the means for including other presc.nt of The Tappan Company, supported by pamopaton n response!e 1esages of customer interest. Mansfeld. Oho. and Glenn H. Meadows, programs to improve the employment Customer Attitudes presdent of the McNed Corporaton. opportunites of m nontes. females. the Akron. One. handcapped. and veterans Perodically, we conduct surveys to j determne customer attitude about our i service and dentify t*1e subjects of ther concem Of 500 Oho Edison customers surveyed in August. 93 percent of re- ! spondents consdered electnoty an average i to above average value, and the same number undscated that we provce good service. ~ ,kh6* i i m

Ohio Edison Cornpany Officers Board of Directors Justin T. Rogers, Jr. Donald C. Blasius Frank C. Watson President President of The Tappan Company. President of The Youngstown Welding ]g Victor A. Owoc Mansfeld. Ohio. manufacturer of and Engineering Company. Executive Vice Presdent microwave ovens appliar7s. kitchen Youngstown. Ohio, fabocator of non-cabinets and bathroom vanities. ferrous alloys. Member. Nominating Douglas W. Tschappat Executive Vice Presdent Member. Nominating Committee. Committee. Audit Committee. William A. Derrick Robert G. Zimmerman Lynn Firestone Senior Vice Presdent independent Electncal and Mechan # cal Senior Vsce Presdent of this Company. Engineering Consultant. also Presdent of Member. Nominating Committee g Leisure Industries. Inc.. Sandusky. Ohio-Fred H. Zuck g jg developer of real estate and ressdential Retired-formerly Chairman of the Board Robert G. Zimmerman building. Chairman. Salary Committee. of Sandusky Foundry & Machine Senor Vice Presdent John L. Feudner, Jr. Company. Sandusky. Oho. Russell J. Spetrino Executive Director of Akron Community manufacturer of centnfugal castings. Vice President and General Counsel Trusts. Akron. Ohio. Chairman. Audit Frank E. Derry Committee. Member. Finance Committee. Vice President Dr. Lucille G. Ford Clyde W. Frederickson Vice President and Dean of Business Vice President Administration. Economics, and D: rector. Donald J. List Gill Ce~er for Business and Economic Vice President Educaton. Ashland College. Ashland. William B. Marvin Ohio. Member. Nominating Committee. Finance Commatee. Comptroller Gregory F. LaFlame Robert L. Loughhead Secreury President of Copperweld Steel Company. Warren. Ohio, manufacturer of carbon H. Peter Burg and aloy blooms. biHets, and bars. Treasurer Member. Salary Committee. Warren G. Fouch Assistant Comptroner ] D. Bruce Mansfleid Retired-formerly Presdent of this Charles N. Glasgow Company and Cha rman of the Board of Assistant Secretary its subsdtary. Pennsylvania Power Joanne Martin Company. Member. Audit Committee. Assistant Secretary Glenn H. Meadows Mark T. Clark Presdent of McNeriCorporation. Akron, Assistant Treasurer Ohio, manufacturer of industnal and automotive lubncation systems, pumps. DIVISlon Managers sy" ems for automated produ" ion and David R. Gundry matenal handling. heating and air Akron Dmson conditioning equipment. swimming pool chemicals and equipment. and automatic Anthony N. Gorant beverage dispensing / control systems. Bay Dmson Member. Salary Committee. Ms E. Markle Victor A. Owoc

ke Ere Dmson Executive Vice President of this Malcolm E. Cash Company. Member. Finance Commrttee.

Mansfeld Dmson Justin T. Rogers, Jr. Donald L. Rearick, Jr. President of this Company and Chairman Marion Dmsson of the Board of its subsdrary, i N. Rod Monahan Pennsylvania Power Company. I Spnngfeld Deson Chairman. Finance Commrttee. Cobert E. Dawson Nominating Committee. To Lef t: (rear; o. sruce Manst.eid. Stark Drvision Douglas W. Tschappat Fred H. zuck. irront; Justin 7. Rogers. Jr.. David C. Bixler, Jr. Executive Vece President of this and John L. Feudner, Jr. Warren Dmsion Company. Top night:(sert to rignt; nodert L. Loughnead. Peter A. FetterW " D" ' G Z ' * * *'" G "" " " d

• 5 -

and Douglas W. Tschappat. () Bottom: (lef t to rignt) Dr. Lucille G. Ford. Frank C. Watson, Donald C. Blasius. VICTOR A. Owoc and William A. Derrick. 20

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i ?:bG kO Na, 4.9.w+ g.,;M. Q.YhT - p w - n 2p y a ;m; m t &gM.w, cr-*+%~ y%,ww.,c&w%g w:p4.e ey p;: x%,., p.km.p sa..a.n,w:y. 7b y m. g e e. v g. e,. 4 t p,gz.W f.,- y n.. v ~. n ~ :. i SQ Mimagemerit Report %u$n@, yMR@,q_mThe Aust Commatee consists of three nor> employee orec-WQ.OThecorwniiriatedfhancelstatementswerepreparedbythe E& tors whose dunes hdude. Inquiry into the number, egent. ~ $2i)mariagement of Ohio Edson Company. who takes resport adequacy and validty of regular a TN st2ty for their integray and obpectMty. The statements were Q by hdependent pubec acccmants and the intemal audtors: l 73' prepared h uibuny with generagy arranted accounung c, the recommendacon ofindependent accountants to conduct l N prindples and are consistent wth other Anandal nformacon 7 the normalannualaudt and speaalpurpose audes as may be

1. R Oppearng elsewhere h this report. Arthur Andersen & Co., h. % requred; and reporang to the Board of Drectors the Comma-

~T5 dependent public accountants, have expressed an opnen on (, tCs findngs and any recorn nendacon for changes n scope. methods, or procedures of the audtng funcnons. The Audt 7 R the Company's finanaal statements, as shown on page 40..,? Commatee heid three mecongs durng 1981 %',.. The Compan/s intemal audtors, who are responstale to : E. / ' tae Audit Commatee of the Board of Drec.ars, review theA, %. m. T..A. ;< o 4 ge, . l resuts and performance of ufm.iig units wthm the Comg 3 Mgf% A 4; + ',1 pany for adequacy, effecDveness and reliabdit/ of accountng [* 7 - { ~ ^ ' y-' and repusiurg systems, as wel as managend and operaong ~ l r

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• PP'*'atey onofourth of the revenue ncrease in that year j

S, +' provement over 1980 resuts wth the Company achievng a was due to increased fueFrelated revenues. Kiowatt-hour i rate of return on average common equty of 14.6% com. sales to customers other than utsees increased I.4% in 1981 J'7.

• pared to 9.7% and II.2% in 1980 and 1979, respecDvely.Two unusual factors were present in 1981 wh after havng decreased 2.8% h 1980. The 1981 ncrease was N i crease eamngs. First, was an after-tax extraordnary gain of princhasy the resut of a 5.0% increase in knowat:-hour sales to indusmal cusmmers.

O PS14,042,000 applicable to the Company's purchase of The price of fuel has be' n hcreasing from 1979 through 7,'f $65,821,000 pnncipal amount of ts outstandng fic mort-gh; e i gage bonds. This program is further descrt)ed below. Second, 1981 but the increase in fuel costs in 1981 compared to 1980 S.. .was the successful settlement of a daimed Pennsylvania tax is pnmarfy due to greater quandnes of fuel consumed. This l 'J hab8ty which the Company, alorg wth other utsees, had - was due to the combined effect of placng Bruce Mansfeld Y s ' *"*M The Company had made provision for posst)ie par Unt No. 3 into cu ivimdal upa,im in late September 1980 f~.. ql.f ment of the tax from 1977 through 1979; this setdement re-and the improved generatng unt avaiabity achieved in

• %suted in an hcrease to 1981 net income of $7,0l2,000.

1981 mmpared to 1980. Were a ret for the deferral of Ouarto Absent these two factors, the average return on common coal costs, however, total fuel costs would have increased by i 2 .pp.w.T,ately $43,200,000 more than the reported increase j . equty would have been 12.9% in 1981. {W y Ray increases implemented by the Cormanes h 1981 for 1931 (see below and Noe I of Notes to Consoldated . $h were the major factors toward the marked earnings improve-J Financiai StW Reduced dependence upon gerwracon gArdJment. Approximatefy twoihirds of the increase h operathg i from more cosdy 064ed untsin 4-revenu under the $n w. es is a result of those rate increases. The remainder wasm au u.tww a w :n:a.M total fuel costs by.ppfw.nately $19,000.000 t x. a u....< c -.~ '*?--'

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.x_ {, a a::W, eig.:p m::.qW@.Q.Q,,py;Q#:#hgQ2.O p : .s t 0 j t. _,J ~ ' s c s v ( s i amount that the contnuary bcreasing prices for coal and os ~ In order to strengthen ts common equty base by tamg ad-l would have otheruse produced in that year. vantage of exsting favorable market condoons, the Com-1 The large reducton n purchased and interchanged power, pany began a program of purchasng certain amounts of ts net, in 1980 resuted pnmarty from improved generatng ug outrandng frst mortgage bonds and preferred stock dunng performance compared to the pnoryear. The increase in 1981 the frst har of n981. The purchase of $65.82I.000 prncpal reflects a reduction of power dehvenes to other utilities classp. amount of frst mortgage bonds ard 26.650 shares of pn= fed as "interthange" p.wer. Instead, the Company sold sub. feced stock under ths program helped to hcrease the com-stantary more short-term power, whch is ncluded in operat. mon equty raco from 34.2% at December 31.1980 to 35.7% ing revenues on the Statements of Consoldated income, as at December 31.1981. drscussed above Comparr'g net power transactons wth New s..ethods of fnancing irutiated by the Corr 4any in other utiktes by combnng the short-term sales and net pur-1981 ncluded establishng a wholly-owned fnance sub-chased and nterchanged power expense the Companes sdory. Oho Edison Fnance N.V. (Fnance), and arrangements moved from a " net buyer" posJuon of S I3.700.000 n 1980 to entered into wth Oho Edrson Fuel CorportaNn (see Note 5 a "ne: seller" poston of 544.600.000 n 1981. of Notes to Consoldated Financial Statements). Because of Approxmatety one-thrd of the total ncrease in other oper-the effect of certan tax treates, Fnance is better able to attract aoon expenses is 3ttrt)utabie to the ncreased operaDon of funds avadahie from European investors than the Company Bruce Mansfeld Urut No. 3 and 8eaver Valley Ung No. I in and has cahanced the Company's fnancng flexttty by 1981 compared to 1980. Correspondogly, substantary al of a!!owing it to take advantage of lower <ost money whch the decrease an 1981 maintenance expense was from the re-may exst from trne to time n foregn money markets. sulung reduced maintenance at Beaver Val ley Ung No. I. The The Company took advantage of a provison of the Eco-Companes' mantenance costs had been nsng subsantu2y nomc Recovery Tax Act of 1981 by seing tax benefts asso-n pnor years because of ef' orts toward enhancng the aval-cated wth property placed in service n 1981. The Company abshty of ther generaung uruts. the resuts of whch have been recetved approxmatety $37.500.000 from the sale. Ths trans-odcated above. acDon has great *y acceleratec.apitairecovery assocated wth The sagnifcant ncrease in r asceflaneous ncome ncluded n ths property snce avadable tax credts and deprecuuon de-other income and deducDons s manly attnbutable to interen ducDons would probabiy have taken many years to realce n ( earned on funds held n escrow for the construcDon of po8u-ful. Don control facdices at the Companes' generaang units. The Companes have deferred approxmatety $63.400.000 increased nterest costs of 53% and 28% n 1981 and n unrecovered costs appicable to Quarto coal. as d:scussed n 1980. respectrvefy. reflect sgn(cantfy increased nterest rates Note I of Notes to Consoldated Fnancial Statements The i and increased borrowngs dunng both years. The Companes Company was granted an anowance n a 198I rate order for ssued approxmatety 5316.000.000 of new otermedete and the addoonal fnancing costs whch resut from the deferred long-term debt dunng 1981 havng interest rates whch range recovery of the coa' :osts, but that alkNvance amounts to an from 8-1/2% for unsecured poAuoon control notes to 18-3/4 % annual return of only 4.3 % based upon unrecovered costs as for frst mortgage bonds. In addeon. 5167.500.000 and of December 3I.1981. $15.000.000 of fnancng was completed through the Oho The Supreme Court of Ohc decson dectanng the mpro-Edrson Energy Trust and the Oho Edrson Fuel Corporanon h pnety under Oho law of recovenng the costs of a termnated 1981. respect:vety, at average costs of 18.7% and 13.9%. re-construcDon project through electnc rates. as service related spectrvefy (see below and Note 5 of Notes to Consoldated costs. fud an impact on 1981 operaoons. As a resut of that Fnancelstatements). Average short-term borrowings n 1981 decson, the sale of common stock ongnary planned for [ were at approxrnatety the same level as n 1980, however August was delayed unul November. Also, an offenng for the average nterest rate on those borrowngs ncreased from 575.000.000 pnncpal amry.Jnt of frst mortgage bonds. wtuch 14.9% to 18.0%. Informaton with respect to the esumated effects cif nflacon had been pnced to cany an nterest rate of 16-7/8%. was upon the Companes is grven n Note 10 of Notes to Cord wthdrawn n Jufy after the Oho Supreme Court deason. soldated Fsnancial statemems The bond sale was delayed unti October at which ame the nterest rate was ncreased to 18-3/4%. That detay wdl rw Capital Resources and Uguiddy crease the company's total interest costs by over s 14.000.000 The cost of the Companes' consductm programs over the unti the bonds mature in 1991. However, in bght of the Oho last five years was approximatery $2.300.000.000, whch re-Supreme Court decsion. the Company made apphcaton for, qured permanent fnanong (net of debt and preferred stock and was granted, an emergency rate ancrease effective t redempoons) of $ 1.400.000.000, in addoon to the incurrence August I.198I. whch is desgned to provde addoonal an-of k>ng-term obhgaDons of 5447.500.000. The Companes ex-nauf revenues of 590.000.000. pect to spend approxrnately 52.900.000.000 for new con-The Company fded an apphcanon wth the PUCO for a rate strucDon from 1982 through 1986. A rnajor porton of ths increase in January 1982 which would increase annual reve-s l( ~) new consta;cDon will be funded through the issuance of nues by approxmately $117.700.0CTJ. Ths increase would addinonal secunces. In addeon the Companes' debt maturF take effect an the lattar part of 1982. In a Jarv;a y 1982 deck I j tes and preferred and preference stock snkng fund require-sion, the PPUC granted Penn Power a rate ncrease which h ments amount to approxmately 5422.500.000 dunng this ws add approxmately $24.900.000 to ts annual operatng fiveyear penod revenues L. 7 b_. __ _.,m.. we em x u __ _

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,1-J n ,-c 7 1981 1980 1979 1978 1977 ^ (In thousands. except per share amounts) Operatng Revenues....,..................... .s1,279,649 5I.000.869 5 994.585 5 862.956 5 796.289 [ Operatingincome. ..c. ;........... ..... 5 252.381 5 169.383 5 163.744 5 123.945 5 146.500 income 8efore Extraordnary ttem... ...;l... . { l83.020 $ 135.150 5 134.807 5 86.030 5 111.574 E Netincome ..,... c.. n., .s H7,062 5 135.150 $ I34.807 5 86.030 5 I I I.574 r { Netincome for Common Stock.. (. .s 163,892 5 101.403 5 105.120 $ 61.259 5 87.863 e Eamings per Share of Cornmon Stock: (based on weghted average number of shares outstandog dunng the year) income 8efore Extrac4 Jnary ltem.. $ 2.10 $ 1.52 51 80 $ 1.19 51.97 Netincome forCommon Stock s2.30 $ 1.52 51.80 $ 1.19 51.97 Drvdends Declared per Share of Common Stock. s1.76 5I.76 5I.76 51.76 51.715 Total Assets at December 31 .54.456.130 53.979.965 53.446.454 53.010.914 52.715.903 L Preferred and Preference Stod- [. Subject ro Mandatory Redt,npton. 5 151.141 5 156.450 5 150.850 5 98.000 5 98.000 Long-Term Debt. .51,759,771 S t.594.384 51.410.782 51.343.195 51.189.821 Energy Trust and Nuclear Fuel Obigaoons .5 447.484 5 265.000 5 5 5 g h hb h [. The Company's Common Stock ts listed on the New York and Mstwest Stock Exchanges and rs traded on other regrstered exchanges Price Range of Common Stock 1981 1980 FirstOuarterHgh-Low. 13 11-314 15-1/4 11-3/4 _} e Second Ouarter Hgh-Low. 13-112 11-7/8 15 12 s. Third Ouarter Hgh-Low. 12-7/8 11 14-7/8 I2 1/2 r Fourth Ouarter Hgh-Low 13 1I I3-I/2 II-I/8 Yearty Hgh-Low 13 Il 15-l/4 11 1/8 g Pnces are as Quoted on the New York Stock Exchar.ge Compoue Transactons. r p ,y- . :n. y. . ~ >...

• • U U? { &.-.m h y n,) *.M $

,u ' :BU. W. s.. I f.D l)D I . r.% w % V. .D U f ' h 5.I'l, Y ~), $ 4 t. ( Holders of Record Shares Heid Nurrter Number F-Individuals. 16I.55 I 88.4 41.689.69I 53 0 I Fducianes... 16.853 9.2 3.568.427 4.5 Brokers. 66 473.905 06 Nominees. 995 06 30.415.022 38 7 Banks & Fnanaa!Insutubons. 50 104.404 0.I L insurance Companes & Other CorporaDons... l.594 0.9 1.438.37I I.8 ChantabW. Reigeous & Educatonalinsatuaans........ 552 0.3 441.873 06 g Pensions. Profit Shanng & Other investment Trusts...... 1.1 I 7 0.6 544.010 07 h TOTAL................. 182.778 100.0 78.675.703 100 0 6 As of January 31.1982, there were '83.434 holders of 78.774.178 shares of the Company's Common Stock. ..[ Ouarterty divdends of 444 per share were pad on the Company's Common Stock dunng 1981 and 1980 Information regarding retaned .~ earnngs avadable for payment of cash divdends is grven n Notes 2 and 4b. h 4'" ..k S,., Y ' ",. [ ' }, k - cww.;;.m e

• Ma a.L_

2

,y._ g..- - - - m x c. s. --C . n- ~. = + Ohio Edison F -%WTGYn5 & ?di!ElG!.iiiROEUT!W ,( } 'For the Years Ended December 31 1981 1980 1979 I'~ (in thousands. except per share amounts) L OPERATING REVENUES... s1,279,649 51.080.869 5994.585

• OPERATING EXPENSES AND TAXES:

/ Operaton-Cost of fuel 413,698 364.894 316.536 ( Purchased and interchanged power. net... 29,321 26.089 60.313 195,075 I70.351 138 712 l-Other operaton expenses Total operaton. 638,094 561.334 515.561 124,213 127.935 102.936 Maintenance. 95,830 85.455 81.224 Provision for depreciaton Amortizaton of terminated construction projects (Note 2) 3,995 84,316 85.143 89 122 Generaltaxes 80,820 51.619 41.998 Income taxes. 1 Total operating expenses and taxes. 1,027,268 911.486 830.841 OPERATINGINCOME 252,381 I69.383 163.744 OTHER INCOME AND DEDUCTIONS: Allowance for equrty funds used dunng constructon. 60,421 57.7I5 50.571 Miscellaneous, net. 17,021 2.104 1.399 income taxes-credit. 53,360 37.017 21.189 Total other income and deductions. 130,802 96.836 73.I59 TOTAL INCOME. 363,183 266.219 236.903 4 NET INTEREST AND OTHER CHARGES: Interest on long-term debt 166,378 147.290 108.401 Interest on Icng-term obligatons(Note 5) 69,183 5.057 Allowance for borrowed funds used dunng construction. net of deferred income taxes. (67,381) (48.814) (29.388) Other interest expense. 26,378 22.304 18.423 L Subsdiary's preferred stock divdend requirements. 5,605 5.232 4.660 y Net interest and other charges 200,163 131.069 102.096 J INCOME BEFORE EXTRAORDINARY ITEM. 183,020 135.150 134.807 EXTRAORDINARY ITEM-Gain on reacquisiton of first mortgage bonds. net of related income taxes (Note 8) 14,042 NET INCOME. 197,064 135.150 134.807 PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS 33,170 33.747 29.687 i NETINCOME FOR COMMON STOCK $ 163,892 5101.403 5105.I20 WElGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 71,180 66.683 58 290 EARNINGS PER SHARE OF COMMON STOCK i (Oased on weighted average number of shares outstanding dunng the year): Income before extraordinary item (after preferred and 5 2.10 5 I.52 5 I 80 pre'erence stock divider.d requirements). Extraordinary item. .20 o Nct income for common stock. $ 2.30 5 1 52 5 180 J DlVIDENDS DECLARED PEP WARE OF COMMON STOCK. $ 1.76 5 1.76 5 I.76 r k The accompanying Notes to Consoldated Financial Statements are an integral part of these statements. s 1 ~ n 2s

I .I (l .[ -h y- }f7~ * 'S.. ,, %j*y I ( p. g ' if.I.Lb M., i _M. _. ',gQ,i A o i. ,,,q -.M . + a 'Oe', M. i. E.7-k. 64... .o, .m. _~y .,. m. 44 # ( ', t + S ,c .. - s s ^~' a At December 31 1981 1980 n ASSETS (in Thousands) g I: tmuTY PLANT s s3.160,271 53.0i0.662 in service.at onginai cost..... Less,-Accc.1ulated provtsson for deprecacon................................ 871,740 806 739 i' 2,288,531 2.203.923 ConstrucDon work in progress.... 1,112,810 948.228 Energy trust construcDon (Note 5)... 434,412 270.057 p. Nuclear fuel sn process (Note 5)... 32,004 13 059 ,c_ 3,867,757 3 435 267 OTHER PROPERTY ANDINVESTMENTS.. 43,338 54 946 f CURRENT ASSET 5. Cash. 11,746 12.924 Temporary cash investrnents at cost, which approaamates t market value. 4,300 I Recervables-Customers (less accumulated provison of s f.863.000 and s I.247,000. respecovefy. for unconectbie accounts) 105,037 96.586 Other......... 26,809 37.975 Matenais and suppies at average cost-Fuel... 84,503 93.861 ..... ~. 40,602 34.393 Y Other.......... .. /. Prepayments and other. 18,% 2 14 268 291,959 290 007 F DEFERRED DEBrTS: Deferred fueland energy costs. 61,537 12.I44 Prope'ty taxes apphcabe to subsequent penod 41,450 38.772 Unamorczed costs of terminated construcDon projects (Note 2). % 489 99 997 Other. 53,600 48 832 253,076 199 745 54,456,130 53 979 965 e t CArrrAuzAT ON ANo uA8stmes F CAPITALIZATION (See Statements d Consoldated CapstafaaDon). (~ Common stockholders" equity. s1,228,486 51.066.957 Pre' erred stock-Not subject ro mandatory redempoon 262,851 265.525 Subject to mandatory redempoon 68,000 72.000 Preference stock subject to mandatory reddipim 56,843 57.250 Preferred stock of consoldated subsdiary-Not subject to mandatory redempbon 41,947 41.947 Subject to mandatory retm 26,298 27.200 Long-term debt. I,759,771 I.594.384 r. 3,444,1 % 3.125 263 LONG-TERM OBUGATIONS (Note 5). ( p-Energy trust 432,500 265.000 Nuclear fuel I4,984 t 447,484 165 000 CURRENT UA81LITIES: Current matunees of term debt and preferred stock 7,581 157.000 Notes payable to banks ote 6). 74.400 41.482 G Accounts payable. 142,718 103.525 Accrued taxes. 47,074 59.159 Accruedinterest. 39,982 39.697 g Other. 25,468 21.840 b 337,223 422.703 u DEFERRED CREDfTS: I Accumulated deferred income taxes...... 124,279 84.630 Accumulated deferred investment tax credits...................... 40,646 28.743 Property taxes apphcable tuubsequent penod 41,450 38.772 i Other. 20,852 14 854 227,227 166 999 i COMMITMENTS. GUARANTEES AND CONTINGENCES(Notes 2,3 and 7)... ) 54,456,130 53.979.965 b The accompanying Notes to Consoldated finandal Statements are an integral part of these balance sheets. V Y . ~, s. L 1 ---~.w .~ ~ 4 ~

w. 26.u

.~ -.~.-- =

b .b N $,..d Ns _ is: i mwm.u...n.. w n m w m mn:- a a.z 1 g m-N.@jYpN N N[.D M. I N k D,eN. %,; e. m.5.a, m, m- ,.a p - y- ^ wr::xw w wr#o v% Oh.io Edison k' : *. <, [M. _ TI& =' ' At h 38

0 1988 1980

( p s W ce s (In Thousand$ .e% sm.r., Q. v ~ ?.I '. g t".'. a,' ?r*;,~ 't COWACN STN EOLAT1r " D.. 'y, ; Common moet 59 par value. authortred 100 nm mn ' hares-L =.4-( 78.675.703 and 6&526.172 shares cu rvantarg sespecovety Pdoie 44.i.J.W.. a. w.,.. '. '.... #.,,..'........ 8 70s.001 5 616,736 J. ~/ s w ~, Other paori capaat............,......... n......... 4,'.., p.......... #. ',c...... 349.214 316 629 Retaried eamrigs(Notes 2 and 4t$.. c. ;... a....w.....T/.......,1.......a.2., .... p..i....,...a., 171.191 f33592 b{; Total common stockholders' equity. o ..c.. ..,.2 M.'c.',f: L... w. o.. '........ t.22s.4e6 t 0s6.957 A - ,.' h C ] [* $ v ',. 4. C ' ~ Optxnal Rederrytun Pnce 5 y ,c -- Nurreer f $hmes' .s d- .. g' r s., ^97[9'" Outnanano ' ' ' b.?J - i -[e s w, 7-19s: 1980 f Per share Thcusand4 e ~ra y i. PREFEllRED STOCK (Note 4ck -.," k' *, q h CumulatNe. 5100 par value s. i< d-

• 3' r

Autnorced 6.000.000 shares - @, '. g Z ', 4 ^ .. N:c r1-w- NOT ti m FCT TO MAPOATORY ..'1' 3 ~ e.*' W .N? T REDEMPTION-L~ 3.90%-7.24 %...,;..,.... : 973350 i nnn nnn $ 303375-108 000 5102.693 97.335 100 000 7.36%-IL20%. 800.000 800.000. 106 520107.400 85.612 30.000 10 000 35a000 850,000 306.480 109.120 91.6 % e5.000 85 000 8 64 %-9.12%........... o. /. 5f6 525 Premun Total not %ect to A' [ mandatory redermison ^ 2.623350 2.650 CD0 5290.00 f 262.as t 2ss.525 '1 SUBECT TO WNOATCM L REDEMPTION (Note 44 ~ 692.760 740 000 $107A60lll A70 5 76.085. 69,276 74.000 i: 10.48 % - 30.76 %........... , ^ nedermocri Minin oneyear. ".. ..fc........ ...i......... Total abfeci to mandatory redermeon....'................. ; '.}......M... A...... ft.2761 (2 mot g 68.000 72HU c PREFERENCE STOCX (Note 44 O CumulatNe. no vaaue- ~ I Authorged 4. .CKD shares /^ i SUBECT TO MANDATORY - i'. REDEMPTION (Note 4et 595 00-5102.50 5enes.. 77.CD0 27.3X) ' 51.0950001.102.5CD 5 29.7CD 2.000 27.000 5 t R0 5enes... f.973.f(D 2.000.000 ' sI6025 - 31.6 t 9 29J43 30 250 Total nbject to mandatory redermoon 2 (D01CD M 1 6 f.319 56.843 57.250 PREFERRED STOCK OF CON 50LDATED SUBSIDIARY (Note 44 '1 Cumutaove.1100 par value-I.. Authorced 740.000 shares [. (s..'f NOT SUBECT TO MAPOATORY REDEMPTION. 4.24%-9.16%.. 4f 9.049 4 f 9 089. 8 t02 980807.320 5 44 238 41.947 47.947 SUBECT TO MAPOATORY REDEMPTION (Note 44 L-8.24% -I100%.. 267.984 772.000 $108 244t !2.110 5 29 4Q 26.790 27.200 r-Redermoon w thrioneyear. (5005 ^ 26.298 27.200 forai nbject to mandattry redempnan.. +. LONG-TERM DEST (Ncte 4fr ..v.... .y ( Fru mortgage bonds: -1* Oho Eason Corrpany-n L f 0% 5enes aJe 1981................ .L. 150.000 50.491 50 491 3-f M % 5enes due 1984 and !985.............,.. ..,..........,~i. 325.000 250 000 0 4-f M %-l&3M% $enes aJe l986 throug120CD... h. 280.798 325.000 k 7 l/2%-9.Ir4 % 5enes aJe 1995 through 2003....... &34%-15 l/2% 5enes aJe2006 throug12010..;..... 443.3e1 465.000 u.. 3.099.670 1.240 491 f Perrisytvarma Power Cortpany-e

i..

214.805 199.805 3-!M%-16 l/B% 5cnesaJe 198t ervoug12Q2. <..... 1.314.475 f 440 296 Totaf fbrst mortgagebonds....., it. [ 5ecured notes and celga0ans-N Ono Eason Cormany-s 35.000 35.000 l 1973 Senes A average riterest rate 542%. aJe 1984 throug120t2 ;., 30.453 30.453 p. 1974 8%-&34% 5enes A and s. due 1990 through 2CD4..............,............. A> 1976 7 74% 5enes O. aJe 1992 through 2(X)6.. 40.000 40.000 8.106 8.186 ?' 1978 7.30 % on. due 1988 ttrough 2CD3........... .x.i. i 53.000 53 000 . D 1979 7-54 % - 9. Senes A F and G. aJe 1995 trroupi2G)9. 50.000 50.000 1980 f o% - 14 f e% 5enes 8. due 1990 thrta;gh 2OIO........................... .A. 14.275 19815enes H. 60% cf floaang gryne. due l983.. 230.914 216 639 f, a Cho Eason Friance NV.- 75.000 1981 17.f/2% Guaranteed NoteL che l1N <................................., Pennsy#varna Power 53.606 47.961 1973 - 1981 5-3/4 % - % and 60% cf floaang p9ne.<he 1983 ttwough 2CD7.. 359.520 264.600 Totalsecured notes and OD6papons unsecured notes of oho Eason Company 8 l/2%-13-13/16%. due 1994 through l986.. c..... 176.000 50.000 75.606 Less-Amount hetIDy Trustee. ..,._..........o.... Total unsecwed notes of Ohio Edson Corrpany (Nose 4g........................ t 00.314 50.000 E7331 f5 5 f 21 Net unamortued ascount an dent.. .....6.. .( } tong <erm deot aJe wmn oneywr.. <5205) ris5 an 1.759.771 f 594.384 s. ' * ' TOTAL CAPfTALIZATION (Note 7)..,,..,. ' !.... Mb,........... !... [. Totai longterm debt............................ 53.444.196

13. f 25.263

g..

^ i -.~ The accompanytig Noers to Corw*ted Finsicial Statements are an hegraf part of these statemerits. ..a ' . r,..M s k.y$.] E,. 5y.y.m.,' A l. O,,y g. _. - 27 W J e.... .? Y n 'y m, .m 4_ u> K y ,p.,. ~ .-,"' - \\l* s ~.

• eI

[Y'i st_ w..- 4.%e.m.,,, m.,,sm.,,,am .s, _~ "Gh ' h "E t WMd. a.dLJ la M..o M L s M.un.s ' --

• ,,~

,,n-c.n,n.m.,,-.,, .,Q T ^ :f : ' ', .g } 'f j' e.y. ?YY $ YYY. $ h For the Years Ended December 31 1981 1980 1979 (In Thousands) -) m Balance at beginning of penod. c,....,.'...,,,. ' 'i f....',:.. ~... $ 133,592 5150.552 5149.615 Netincome ....................7...;..............,. 197,062 135.150 134.807 '~ ' ? ^ <,.s.'. - 330,654 285.702 284.02_ Deduct- -2' os Preferred and preference stock dividends....~.1.........~.. 33,160 33.724 29.950 Common stock dividends................".1... e.. '....... I26,030 118.P37 103.356 Capital stock issuance expense................ ;.......,... 273 289 564 159,463 152.110 133.870 Balance at end of period (5ee Notes 2 and 4b for dividend p restncDon). s171,191_ $ 133.592 5150.552 i k _b a"aUM. h., _. J h fi'Dh) t.h [.J 3e Me z w h'k. 5 y gy ~ E t Preferred and Preference Stock Subject to Not Subject to Mandatory Common Stock Mandatory Redcuenni Redempton Other Par or Number Par Pad-in Number Par Number Stated of Shares Value Capital of Shares Value Prerraum of Shares Value (Dos us in Thousands) Baance. lanuary 1. '979 52.120.23C 5469.082 5232.422 3.0 0.049 5306.905 5 567 980 000 5 98.000 Sale of Common Stock. 6.000.000 54.000 4l.820 I Dnndend Reinvestment Plan I.502.139 13.520 8.068 Sale of Preference Stock-i 595.005enes.. 9.000 9.000 5102.505enes. 18.000 18.000 9 $1.E05enes. 2.000.000 30.250 ') Sanlong Fund Redci+6ni of 10.76% Senes of Preferred Stock 79 (20.000) (2.000) y f Balance. December 31.1979. 59.622.369 536.602 282.389 3.069.049 306.W5 ' 56 7 2.987.000 153.250 Sale of Common Stock. 6.500.000 58.500 25.805 ~ e Divdend Rewwestment Plan 2.403.803 21.634 7.979 Sale of 10.50% Senes of 1 I. Preferred Stock.. 3 100.000 10.000 Preferred Stock Sanlang i Fund Redcuen.nis-3 10.48% 5enes.. 260 (20.000) (2_000) F - 10.76% 5enes 175 (20.000) (2.000) i ll.00% 5enes 21 (8.000) (800) Balance. December 31.1980. 68.526.172 616.736 316.629 3.069.049 '306.905 567 3.039.000 158.450 Sale of Common Stock. 7.000.000 63.000 21.875 ~s Drvdend Reinvestment Plan 3.122.631 28.103 7.751 -e Preferred Stock Sanlang i; Fund Redeiiva nis-r 10.48% Senes 585 (27.240) (2.724) 4 10.76% 5enes 361 (20.000) (2.000) I I1.00% Series... 53 (4.016) (402) Other Preferred Stock Redcirinnis-3.90% 5enes...... 271-f3.790) (379) '. - 4.40% 5enes 254 (3.720) (372) (3) 3 4.44% Senes J-902 (13.440) (1.344) / 4.56% Senes... 386 . (5.700). (570) (6) Conversson of S t.80 g. 1' {26 9J) (407) c-Preference 5tock. 26.900 '242' 'I47 ' s . s Balance. December 31.1981. 78.675.703 5700.081 5349.214 3.042.399 5304.240 5 558 2.960.844' 5152.917 s, The accompanying Notes to Consoldated Financial 5wia nci 6 are an integral p.-t of these statements. -J r* ' 2 + if, 'f ..%+ i h 1 ,s s a .; y.7 e x _.r-e w. :.. m 4 ~ Gk kAS W %d.'. ~

- m n m e - n n e.n/.,, n; n, , g.,, a a ' ' w w a % @.~.. n @ n : y n g g G &c..% + & % 4 ; # :.:. 4 w Jn1QGIRQd T Ohio Edison DEEJM.sHEsGy M LMR1 C w 1981 1980 1979 F For the Years Ended December 31 j(b). .(in Thousands) s C !/ - SOURCES OF FUNDS: $183,020 ' '5135.150 5134.807 t, income b4 ore extraordnaryitem ~,. ( Principal non-cash items-s. 's Depreciation and amortization- = Charged to provision for depreciation.................... 95,830 -85.455 81.224 - ? Charged to other accounts..................... '....... 1,318 ' 1.282 1.596 7. Amortization of terminated construction projects ;......... ;.. 3,995 E-Deferred income taxes net................ '... 99,179 83.536 18.921 Investment tax credits, net....................... (772, (27.201) 13.815 i Allowance for equity funds used dunng construction........... (60,421 (57.7I5) (50.57I) (49,393 (9.114) 1.687 l Deferred fuel and energy costs, net......,.........,... 272,756 211.393 201.479 Less-Dividends on common stock........... 126,030 I18.137 103.356 33,160 33.724 29.950 [ ; Dividends on preferred and preference stock............. _113,566 59.532 68.173 Net funds from operating actmoes............. 14,042 Income from extraordinaryitem. Gain on reacquisition of first mortgage bonds, a non-cash item... (26,276) i Net funds from caming actmDes...............,... ;.. 101,332 59.532 6'8.173 Financing actmoes- _ l Commonstock. 120,729 113.918 117.408 10.000 N Preferred stock....... F Preference stock...... 57.250 l 95,000 322.000 20.000 l i. First mortgage bonds. p'. Secured notes and obligations 94,920 50.000 59.000

j. -

Unsecured long-term notts. net. 24,314 80.000 l 182,484 265.000 l Energy trust and nuclear fuel obligaDons............. (202,336) (95.800) (32.000) c-L- Retirement of long-term debt and preferred stock... 32,918 (150.517) 95.395

1., -

Incr?ase (decrease) in notes payable to banks. h('. Saleof taxbenefits 37,531 385,560 514.601 397.053 w.- Net chsoe in current assets and current liabiliDes excluding W 7 nct?S payable to banks and current matuntes of long-term debt and preferred s ock-(4,300) F Temporary cashinvestments.......... 2,715 (29.171) (13.235) ( Recervables. 3,149 (33.843) (12.075) [ Matenals Jnd suppies... y 39,193 1.474 6.500 t t ~ /.ccounts payable. f b, (12,085) (1.186) 13.734 p.ccrued raxes Q, Miscellaneous, net. 397 12.323 (4.005; = F 29,069 (50.403) (9.081) ?' Over, net-39,847 (20.938) (3.545) ? Coastruction funds held in escrow includrng accrued interest 60,421 57.715 50.57I y Mowance for equity funds used dunng construction....... l Deferred income taxes on allowance for borrowed funds (59,530) (38.690) (16.892) g. used during construction.. 11,345 (6.797) (9.533) s Miscellaneous. net., _ I f 52,083 (8.710) 20.601 S568,044 5515.020 5476.746 GROSS PROPERTY ADDITIONS. t;: L The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. [@- ,'^Q f; ~ N b b o L~ t y +3 U.:.-e) ( p.~ ( ? '., r I r 4 a n 7.. a. _ s a _,( / 6 a 29 b b a u. - ~.s --P- % 2,: w '2 c %., w.m ;.;_ ~ m._,.

~ .p' M vy:.J;e.:.3.JN~.b... w[u.#%:a d

• W W 3 -N N -. 7'M4 4 r
• C N N ', ?, ' W* w

~% p.w v www ma c. y ch N 8 eM M'Jc %0Ma G2Mu;.M%

i. M. u. 3 %. % M a 2 w k.a.s -

W.M L.M ya. qf & p*ffM &*V h'YQ_r:mm:n,-,.a Mr.x m mr m ~ ~ ~-., a.c T 7 : w ~~~c w w m p i g m. w % q w s :r-- - ~rs%>w: y n n:./ y-WWid'%fE&-

y

,? ' ! f P N Mh*,.'.i ~, W: ~- + l ~ f Q.For the Years Ended December 31 <!e x W N 1981 - 1980 1979 ,o r n..e:: .g y e e <. C - 'y (in Thousands) )

• N

+ c GENERAL TAXES.~ %%...@J.:;yWh. *1 .5 s _ Real arxl personal p(roperty'l/.. :. ; 4; t.%.... C.t.2. J.:... 4 Jd..Y.... ' '* 1 3 .5 37.183 5 41.042 7 $ 39,193 Stategrossreceipts l).4 Ji 1 cJ..... '.- 34,144 .38.753 41.127

d. f6 a; Unemployment and old age benefits ?.W.y b. J; p....'.1...... ~ ~

8,010 6.408 5.569 ? E n, (Miscellaneous M c~r/.i.s ;i ; e.,.aJ7. ;..,2.,.. 4 ;.,...; 2,%9 -. 2.799 1.384 $. E.. ;*.Totil general taxed. l'.W..E... $ l(.'.,. c;. c.. c.. m.. ~. .w ~ m. s 84,316 5 85I43 5 89.122 1w PROVISION FOR INCOME TAXE5 4 n @ OH'.Ni'.' Currently payable-i cFederal :;2R.0.... l'..y p. M&.. J b w .. '. h d ; J.. 1. '. *..'s....... c.-c.. J 80 's (3.043) 5 3.731 s. Y n State i:.i i:. ;;;;.......K.'. ;. M. :.. ;c... ;:.......

678 i.234 Foreign E.41.'.'.//.v.5 J. rcN ;.d..~.. ' ; c.:....!......

59 .. y~, a y- = 817 (3.043) 4.965 g e Deferred, net (see below)

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4, r i Federal..:... c.:.............. 3 3,.......:s.J.......J. 96,218 BUOS I7.984 3 State.~..J...:... R........ c;,;... ~...; n......... 2,%1 2.431 937 s c-3 s ;y - m 7.( 99,y 79 83.536 18.921 m. e (772) (27.201) 13.815 investment tax credits, net of amortizaDort(ii) Tc... ; 5 J ;...'. Z... o Total prowson forincome taxesT.5\\ ccc. ~... ;, c,.......... S 99,224 s 53.292 5 37.701 INCOME STATEMENT Cf.A551FICATION OF m PROVISION FOR INCOME TAXE5 Operating expenses.... c.... ;;:...., ;R........ :1...... s 80,820 s 51.619 5 41.998 Other income n.... :...... c....... ;;.......... /.... (53,360) (r.017) (21.189) Allowance for borrowed funds used dunng '+ construccon................y.................. 59,530 38.690 16.892 U Extraordinary item.. t........ J.................... 12,234 ~ . Totalprowsson forincome taxes.... $ 99,224 5 53.292 5 37.701 n ~~ SOURCES OF DEFERRED TAX EXi>ENSE Cost of terminated construcDon projects. net (Note 2) ~........ 5 5,197 5 33.181 5 J Deferred fuel and energy costs, net... 7.................... 12,308 4.210 (88l} Excess of tax deprecanon allowed pursuant to 13,669 9.334 5.345 the Class Life ADR and ACRS deprecaton systems, net... Deferrea nterest on icased nuclear fuel. net., s................ 9,567 Other. net................ (1,092) (1.879) (2.435) 4Q 39,649 44.846 2.029 t Allowance for batowed funds used during ,? construction, whsch is credited to plant... 59.530 38.690 I6.892 5 99,179 583.536 5 I8.92 I Total deferred tax expense, net..... RECONOUATION OF FEDERAL INCOME TAX EXPENSE AT' .. STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXE5 g 8oolc income before provision for ncome taxes........ 3296 286 5188.442 5172.508 [ Federal income tax expense at statutory rate 4 3136,292 5 86.683 5 79.354 ReducDons in taxes resulting from: - ' v! 'I '. ; -,. ~- = AEowance for funds used dunng construcDon "' - ^ m which does not constitute taxable income (ii$..... 7. J....... ' (27,794 (26.549) (28.036) Excess of tax overboolc depreciation v.',. 2.. /...y. '........ (2,422 (5.874) (9.918) O,th,er, net. c.T....; J...'... .;...T.i....s.,...;...... (6,852 (968) (3.699) . Totalprowsson forincome taxes 14..... Z........ s 99,224 - 5 53.293 s 37.701 ,7g ms. ($ Amount for 1981 mcludes a credit d 514.352.000 appbcatde to Pennsyivania Erase Tax on Gross Receipts accrued durng the penod January I.1977 w-through December 31.1979. The tax. which was enacted in 1977, was repeated efecove January 1.1980 and had teen the subject of krigaton A 7 '. (4 Amount for 1980 reflects the reversal of previously recorded anvestment tax credits and related amoruzauon. settlement was reached h Deterreer 1981 wtuch provided for payment of approxrnatefy 51.596.000. represenong 80% of the ctamed tax habehry y; v 7,c net operaong losses.. _ . ~.. - m sc a %, @i$ Represents the tax effects of the eguty pornan M 1981 and 1980. and the equay pornon and 25% of the Company's debt poroon n 1979. W 1,The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. ' - j .,m., - w s -l}- '.

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TT hscD Ic . [ s'~ s 1' NY A5 h Vf - w The consolidated fir ancial statements include Ohio Edison ing issued January 27.1982. deferred any acton on the { Company (Company) and its wholly-owned subsidiaries Company's request untilits next such heanng. In the mean-Pennsylvania Power Company (Penn Power) and Ohio time the Company will continue to defer and accumulate Edison Finance N.V. (Finance). All significant intercom-the cost of Quarto coal in excess of generally prevailing pany transactions have been eliminated. The Company market poces. and Penn Power (Companies) follow the accounting Prior to May 1,1981. Penn Power deferred certain increased gl policies and practices prescribed by The Public Utilrtes energy costs which it estimated would be ballable to most l l 7 Commission of Ohio (PUCO). the Pennsylvania Public Utili-customers in future penods, in accordance we.h the energy j i ty Commisson (PPUC) and the Federal Energy Regulatory clause adopted by the PPUC. The energy clause provided Commission (FERC). The more significant policies are sue for 1) the recovery or refund, over a six-month penod mated below. beginning two months after incurrence, of energy costs l Revenues which differed from established base energy costs; and 2) j-The Companies' residential and commercial customers are an adjustment for any over or under collecton resulting [ metered on a cycle basis. Revenue is recognded for electric from the operation of the clause. Effectue May 1.1981. by y service based on meters read through the end of the order of the PPUC. a "leveleed" energy cost rate (ECR) month. was initiated. The ECR in effect in 1981 was based upon the anticipated energy costs for the last eight months of Operating revenues and net income for 1981 include ap. 1981. A new ECR which includes adjustment for any over proximately 58.905.000 and 54.755.000 (5.07 per share of or under collecton from customers will be recalculated common stock), respectuely, apphcable to a wholesale rate increase requested by the Company and permitted by the each subsequent year in Novemoer wrth an effective date FERC to become effectrve January 10.1981, which is sub_ of January 1. Accordingty. Penn Power defers tha dif- ~ ject to possible refund. Management beheves that any ference between actual energy costs and the amounts re-covered from rts customers. } refunds which may be required in this case would not have a matenal effect on 1981 results of operatons. In January 1981, the PPUC ordered that Penn Power not Deferred Fuel and Energy Costs include the cost of Quarto coal in its energy clause and (# The Companies record the cost of fuel when it is con-subsequent ECR at more than generalty prevaihng market i sumed, except as discussed below. prices pending completion of a PPUC investigaton to determine the reasonableness of the costs of Quarto coal. Effectue August I.1981, the Company replaced its fuel ad_ Penn Power has deferred $5.428.000 of such costs justment clause (FAC) with a new electric fuel component through December 31.1981, of which 55.321.000 and (EFC), in accordance with a PUCO order. The EFC is an 5107.000 is applicable to 198I and 1980. respectrvety. estimated fixed rate per kilowatt-hour included on customer bills for a six-month period and is based upon fuel-related Reference is made to Note 7 for a further discussicn of the costs for the preceding six-month penod. Any over or Quarto project. p under collection resulting from the operaton of the EFC will be included as an adjustment to the new EFC rate in a Utility Plant and Depreciation subsequent six-month penod Accordingty, in August 1981. Utiuty plant reflects the onginal cost of constructon. in-the Company began defemng the difference theen cluding payroll and related costs such as taxes pensons actual fuel-related costs incurred and the amounts re-and other fnnge benefrts, administratwe and general costs covered from its customers. and allowance for funds used dunng construction (see The PUCO has ordered that the Company defer and not AFUDC). include the cost of coal purchased from Quarto Mining Company (Quarto) (see Note 7) in the FAC and subse. The Companies provide for depreciaton on a straight-line quent EFC at more than generally prevaihng market prices basis at various rates over the estimated lives of the property. without pror PUCO approval. At December 31.1981 such The effectwe composite rate for electre plant was 3.3% in deferred costs amounted to 557.935.000, of which 1981.1980 and 1979. The Company's depreciaton rates 548.083.000 and 59.852.000 is appbcable to 1981 and include provisons for the estimated decommrssoning costs 1980, respectwefy. In its order, the PUCO stated that it will for its only nuclear generating unrt in service. Penn Power y permit the Company to recover its actual Quarto costs, in. provides for the cost of decommessoning radioactive com-Ciuding the previously deferred costs, when the weighted ponents only, in accordance wrth a PPUC rate order. average pnce of Quarto coal for six consecutwe months approaches the level of 259u above the generally prevailing Common Ownership of Generating Fac!!ities market price of comparable coal. The Company, in connec-The Companes and other Central Area Power Coordina-j( tion wrth its regular semiannual fuel heanng. requested tion Group (CAPCO) companies own, as tenants in com-3 that the PUCO modify its present method for recovery of mon. vanous power generating facihties. Each of the com-these costs. Although the Company believes that the panies is obhgated to pay a share of the costs of anyjointly methods it proposed at the hearing for recovery of the cost owned facility in the same proporton as its ownership irr-of Quarto coal, including recovery of the deferred costs, are terest. The Companies' portions of operatag expenses l reasonable, the PUCO in its order resulting from that hear-associated with thesejointly owned far sistes are included in -dan.M -~ -- d 4 k(%e -um%Ma - *~ ^ ' ,u.% e g gp.,,,, . #w. .g m, _%e m, g,.g a= 4-M WM

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xn ( ~ s. a. .~ - 9 ,n.- \\ ,8-9 ~.,.; { J V F the corresponding operating expenses on the Statements of on the Statements of Consoldated Taxes. Deferred tax ex-t Consolidated Income. The amounts reflected on the Con-pense results from bming differences in the recogniton of solidated Balance Sheet under utility plant at December 31. revenues and expenses for tax and accounting purposes. 1981 include the following: The Companies allocate the income tax credit resulting ( .i Acoruated utary cormanes' from interest expense related pnmanly to constructon work 73,ny, c "' Q in progress, to income taxes-credit included under other h* [{ o,n,,g,n,, income and deductons on the Statements of Consohdated g F w H.samms e7... s 12i.ssi s 22. ass s 29.43o esaos income. 2aNsN.I ' 7i.523 'to.s3s so 6s s For income tax purposes, the Companies have claimed 677.477 seaver vaney es. 3sinist 55.468 46 2s6 s2. sos liberalized depreciation (double declining balance. E seaver vancy s2. 460.200 4i.ess Ig guidehne lives. Class Lrfe ADR System and Accelerated Cost Peny si anc e2. 786.ss7 3s.24 % Recovery system (ACRs) provision metnods; and. consis-p Tcmai - s i.is2.iss s i49.844 s i.333.3 gg g g ncooes common racaes accacne e seaver vaney 2. accounting except as indicated on the Statements of Con-P A!! nuclear fuelin process relates to the CAPCO units but is axes. i. not segregated among them. The Companies expect that deferred taxes not currently 'L provded will be collected from their customers when the Nuclear Fuel. taxes become payable, based upon the estabhshed rate The Companies charge the cost of nuclear fuel to fuel ex-making practices of the PUCO. the PPUC and the FERC. pense based on the rate of consumpton. In addttion. the 4 F Company includes in fuel ;xpense the estimated spent The Company receved 537.531.000 in 1981 resulting s nuclear fuel disposal costs which are being recovered from from the sale of tax benefits appbcable to property placed in '3 its customers. The storage of spent nuclear fuelis necessary service dunng 1981 in accordance wrth provisions of the P until the manner of its disposal is determined. which may Economic Recovery Tax Act of 1981. Of the total. 512.675.000 was recorded as additonal deferred envest-L[ take many years. Penn Power received an allowance for the estimred permanent disposal costs in a January 1982 ment tax credits on the Company s Consoldated Balance PPUC rs;e order. Sheet and will be amortized over thirty years. The remain- ) [~ ing 524.856.000 was recorded as a reducion to utitty i Allowance for Funds Used During Construction plant in service and will serve to reduce the total provrson O (AFUDC) for depreciaton over the hfe of the property. {_ AFUDC. a non-cash item charged to constructon work in The Companies defer envestment tax credits utihzed and y progress dunng the constructon period, represents the net amortize these credits to income over the estimated Irfe of g cost of borrowed funds and equrty funds used for construc' the related property. At December 31.1981, approximately p ton purposes. AFUDC varies according to changes in the 591.000,000 of unused investment tax credits were p level of construction work in progress and in the cost of availabie to offset future Federal income taxes payable. 3 capital. The Companies compute AFUDC utihzing a net of These credits expire at the end of the following years: 6 tax rate consistent with the rate treatment granted by the PUCO arid the PPUC. The rates used by the Company 1991.... . S i 8.000.000 g( were 9.84%.10.14% and 8.75% dunng 1981,1980 and 1992. 20.000.000 1979, respectively. Penn Power used rates of 8.50% in 1993. 9.000.000 ((L 1981 and 8.00% in 1980 and 1979. AFUDC apphcable to 1994. 7.000.000 long-term obhgations is based on actual interest accrued 1995. 33.000.000 dunng the penod [see Note SJ. 1996.. 4.000.000 The Company's 1980 net of tax AFUDC rate reflects an ad-59I EM lI justment in the FERC formula used to calculate the rate. l The adjustment resulted from a Company study whicn in addition, the Companies had approximately i F' found a significant undercapitalization of construction 520.500.000 of tax net operating losses at December 31 work in progress in 1980 as a result of the failure of the for-1981 available to carry for.vard until the end of 1995. Such .I mula to give adequate effect to interest costs actually in-tax net operating losses have been recognized by not pro-lF curred in financing construction activrties. This adjustment viding deferred taxes of 53.500.000 and 55.700.000 in ,Y increased 1980 AFUDC by approximately 511.628.000. 1981 and 1980, respectively, which would otherwise have P' # 'F net of income tax effect. The Company received permission L from the PUCO staff to record the additional AFUDC. sub. Pensions ject to determinaton by the PUCO of its includability in The Companies' trusteed, noncontributory pension plans future rate base. Management has no reason to beheve ) cover almost all full-time employees. Upon retirement. that this amount will be disallowed in future PUCO rate employees receive a monthly pension based on length of procee 4 [p service and compensaton. Pension costs for !951,1980 Income Taxes and 1979 were $ 15.311.000, 514.931.000 and r Details of the total provision for income taxes are shown $ 13.731.000. respectively. Of those amounts. 59.237.000. ...a a b. 32 Laa. a.2h; - c. ..-?. a u--.+.-- - - m.

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y. ~ ,7 ,a y up - ~. s $9.259.000 and 59.163.000, respectrvely, were charged to - costs as service-related costs in that company's rate case, operating expenses. The balances were charged primarily', even though the decisions to construct and terminate were a. to construction. Such costs include the amortization of past 'both, when made, prudent and reasonable. A subsequent g service costs on an actuanal basis over 30 years. The Com,. appeal to the U.S. Supreme Court by that company was L panies fund pension costs accrued. A comparison of ac- ' denied on January 25.1982 because of the lack of a prop-cumulated plan benefrts and plan net assets from the two _ 'erty presented Federal queston. That company has since latest actuanal reports is as follows: '.1" . taken further acton which may still affect the abihty of the June 30. ' Company to recover these costs and. in any event, further e 1981 1980 acton by the PUCO is possible. The PUCO has en fact Actuarial present value of ' Supreme Court case not to wnte off any of its unrecovered ordered the company that was a party to the Ohio [ accumulated plan benefits. s128.808.000. costs in the terminated units pending. among other things. s144.407.000 C' Vested..... Nonvested. 11.467.000 '9325000 such further action as the PUCO may take in that com-i.E 5155.874.000 5138.533.000 . pany's current rate case. Until an adequate resoluton is reached of aff uncertainties concerning the Company's h Net eve -ability to ultimately recover these costs, the Company be-5213.749.000 519 t.678.000 forbenefits !seves a wnte-off of such costs would be premature. To the b Assumed rate of return for extent that it is ultimately determined that the Company actua pr 'I P'"Y

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8% quered to wnte them off. The unrecovered balance of such I Effective January 1.1981 certain amendments were made costs allocable to the Company's PUCOjunsdictonal cus-tomers at December 31.1981 approximated $77.612.000 to the plans relative to the calculatoriof benefit payments 2 to retired members. The effect of these amendments in. (547.742.000, net of income tax effect). Had the Company creased the actuarial present value of accumulated plan been required to wnte off the costs as of December 31. 4 benefrts by approximately $5.018.000 through June 30. 1981. the Company would have had approximately T 1981. 551.402.000 of consohdated retained earnings unrestncted h' The above total actuarial present value of accumulated { for payment of cash dividends on the Company's Com-mon M g plan benefits reflects pension benefits apphcable to eligible p employees based upon present salary levels and past years in hght of the Ohio Supreme Court decision. the Company of service accumulated through the valuaton date. This is and allintervening parties reached a settlement in the Com-the generally accepted reporting procedure set forth by the pany's rate case which was pending at the time the deci-l Financial Accounung Standards Board. The Companies' - son was announced. The settlement will add approximate-annual contributions to the plans. however, consider ly 590.000.000 to the Company's annual operating estimated ulumate salary increases due to inflaton and : revenues, and was in heu of the 5139.000.000 increase other factors and the esumated total service expected to be prevously sought by the Company. In order to make the i accumulated by employees. This is a widely recognized settlement agreement effective with bills rendered on and ?- funding technique and is consistent with the recommenda. after August 1.1981, the Company made apphcaton for. ton of the Companies' actuary. In addrtion, the actuary and was granted. an emergency rate increase at the same F recommends, and the Companies utihze, a discount rate of $90.000.000 level. Neither the temporary emergency rates of 6% for funding purposes. Differences between funding nor the permanent rate increase which as expected to bases and reporting requirements can have a significant ef. Supersede those emergency rates includes or will enclude fect on the compansons above. provision for any condnued amortizaton after July 31 1981 of the costs apphcable to the terminated unsts and thus the new rates will in no event te subject to further ad- _. i, e[. A_, ~ @w s,,y justment with respect to these costs. Accordingfy, the n e. _.1-p vrw 4 in January 1980, the Comparties and all other CAPCO Company discontinued amort:zaron of those costs on y companies terminated plans to construct the following four August 1.1981. / nuclear generating units-Davis-Besse No. 2 and No. 3. The Babcock & Wilcox Company, as suppher for the and Erie No. I and No. 2. Constructon costs unrecovered nuclear steam supply systems for the terminated units. has by the Company and Penn Power as of December 31. asserted claims in connecton with delays in. and the ter-1981 apphcable to these units amounted to 581.892.000 minaton of. the units. The Company's and Penn Power's and S 14.597.000, respectively. The PUCO had authonzed . shares of the claims are approximately 5109.300.000 and r recovery of the applicable portion of the Company's share $ 39.200.000. respectrvely, before the appicaton of certain ( ) of the construction costs from its PUCOjunsdictonal cus-credits of undetermined amount. Representatives of Bab-pq tomers over a ten-year period beginning in February 1981-cock & Wdcox and the owners of the terminated nuclear On July 15. 1981, the Supreme Court of Ohio ruled in a units. including the Companies. have been meeting to case involving another Ohio utihty company (also a co-discuss the matter and the discussons have been pro-owner of the terminated units) that under existing statutes ceeding in a manner that the Companies consider satisfac-the PUCO had exceeded its authority in allowing these tory. The Companies cannot predict at this time what. If c p,'. 4M:A; j. y " f Q ;h ;. A,, V i.) I h u. u _A 2 Odh,.6Chie.;.,a u _.,% c., _ 33 am.; #

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~ Mud 1691@$istiMt% %Q & y, _g y c y-E p cny, amounts they may ultimately pay in connecDon with chases made with optional cash payments are made at a J these claims nor when such amounts might be paid, but price equal to 97% cf such average. The plan will be i. believe any amounts they may pay in the future as a result amended early in 1982 to include holders of shares of the L of these claims will be substantialty less than the amounts Company's preferred and preference stock. The purchase claimed. Depending on circumstances that exist at the of Common Stock made with reinvested cash duidends on time, any such payment allocable to the Company's retail preferred and preference stock will be at a pnce equal to 4 customers may result in a wnteoff which woukt reduce 100% of the average market pnce. At December 31.1981. [- net income for the then current penod, the effect of which the Company had 1.676.416 shares reserved for issuance ~ cannot be determined at this bme. under this plan and 1.973.100 shares of Common Stock The Companies are current!y seeking approval from the reserved for possible conversion of the 51.80 Preference m FERC to recover tne construction costs and any contrac. Stock. The Company has filed a Registration Statement tors' cancellation charges from FERC jurisdictonal cus, with the Secunties and Exchange Commission to increase the number of shares available for issuance under the Dtve-tomers to the extent they are allocable to those customers. dend Reinvestment and Stock Purchase Plan by 6.000.000 Penn Power requested recovery of the construction costs shares. allocable to ig PPUCjunsdictional customers in its recently [ concluded PPUC rate proceedings; the PPUC deferred its (b) Retained Earnings decision pending the outcome of a current investigation of Under the Company's indenture the Company's con-t the entire CAPCO construction program. The FERC gave the solidated retained eamings unrestncted for payment of i Companies permission, for accounting purposes only, to cash dividends on the Company's Lommon Stock were [ amortize these construction costs plus contractors ~ cancel-599.f 44.000 at December 31.1981 (see Note 2J. Under t lation charges. if any, over a ten-year penod beginning Penn Power's Charter. 527.905.000 of retained earnings at lE with the date that rates in their next rate filings before such December 31.1981 were unrestricted for payment of cash agencies which provide for recovery of the costs become dividends to the Company. effective. The Companies believe that the construction (c) Preferred and heference Stock costs were prudently incurred and have no reason to be-The Company has 4.000.000 authorized and unissued leve that the PPUC and the FERC will not act favorably shares of cumulative 525 par value Class A Preferred Stock. } gn their requests. At the Companies' option, all preferred and preference r }* m stock may be redeemed in whole, or in part, at any time up ess an 30 nm mmMhan 60 days notice. uness The Companies lease nuclear fuel, certain transmission otherwise noted. Redemption of all preferred and I; facilities, computer equipment, office space and other in-preference stock issued within the past five years is subject p cidental property and equipment under cancelable and to certain restrictions regarding refunding operatons. The noncancelable leases. The total rental expenses included optonal redemption pnces shown on the Statements of on the Statements of Consolidated income for 1981.1980 Consolidated Capitalization will decline to eventual 9 P l[ 0.3 respe tive'ly. e future ir renta b rg nes commitments as of December 31. 1981 for all non- ,e f~ cancelable leases are: (dj Preferred Stock Subject .5 19.223.000 to Mandatory Redemption i 1982. 18.638.000 The Company's 10.48% Series and 10.76% Seres each in-1983......... 16.040.000 clude provisions for a mandatory sinking fund to retire a F 1984.. 9 1985. 10.812.000 minimum of 20.000 shares every year on December 1 and l< 1986. I1.841.000 January I. respectivety, at 5100 per share plus accrued h Years thereafter.. 311.356.000 drvidends. Penn Power's !I% Senes includes a provision i If all noncaprtalized financing leases had been capitalized, for a mandatory sinking fund to retire a minimum of 4.000 F the effect on total assets, total liabilities and expenses shares every year on January 1. at $ 100 per share plus ac-crued drvidends, and its 8.24% Senes includes a provison

~

would not be material. for a mandatory sinking fund to retire a minimum of 5.000 j g'g shares on December I in each year beginning in 1982, at 5100 per share plus accrued dividends. Penri Power's (a) Common Stock 10.50% Senes includes a provision for mandatory redemp-Through the Dividend Reinvestment and Stock Purchase tion of the entire seres on April 1. 2040 at $100 per share Plan, holders of Common Stock and most of the Com-plus accrued dividends. panes fu!!-time employees can acquire additional new ~ l6 shares of the Company's Common Stock by automatically The sinking fund requirements are 51.776.000 and g 54.898.000 for 1982 and 1983. respectively, and / l reinvesting all or a portion of their Comman Stock l E dividends and by making optional cash payments. Pur-54.900.000 for each of the threeyears 1984 through 1986. chases made with reinvested Common Stock dividends are (e) Preference Stock Subject l g made at a pnce equal to 95% of the average of the high to Mandatory Redemption i y and low market prices on the investment dates, and pur. The 5102.50 Series and the 595.00 Senes each include O4 - x. J_ a _. 3 ~ u.-

m%ld N m.j[s.mM I UU M: mA.. We:gp m,h N y,lc o;g :s p.. o XM%2KM2M1.MudinM@&MbLD W:S h. _oye ;% eo-s. %EddrQO:: CV"hy;< y.U'Mv'"7WMP7/W'i"-l'7NEWXN7"~M'~"~~ m 7 ~ "" g wg: pt:N#3 an. ,,3 W N @ w.w. g _ y% n b Mi f.r y % % c p ; % :{y M; x w?.6 <y. M% QW 6 3e - s - b,.y m :.. <uax; o - + igu., w - &;% 2:,+ M,wNVi@ $ml6: " g;b -MMWE%Wk $5 <%+ -~ .i 3 q'g % ; T c %nk +.w. Sgy- % a W ~ p g e-y h qn 2 L K M i f :,ssw ::P 3G %:,: '. v.s. ',3 g g g-M;.gf,- M;. y - N@l, ' provisions for a maridatory sinking' fund to retirs 'aIbonds, the Company is enotted to ? minrnum of 900 and I.800 shares respectwely, on.luly 1 The Company pays an annual fee of 1/2% of the amount b In ta' h year beginning in 1984 and 1985. respectrvely, at ' - of the letter of credit to the issuing bank and is obligated to c MW:$ 1.000 per share plus accrued duidends. The $ 1.80 Series reimburse the bant: for any drawings thereunder. p a minimum of 100.000 shares on October I in each year ~ includes a provision for a mandatory sinlung fund to retire (hj Subsequent Financing j.> beginning a,n 1985. at 515.125 per share. plus accrued amount of first mortgage bonds 15-3/4% Series due 1989. in January 1982. Penn Power sold $15,000.000 principal ge k 'dwidends. ( _ [ ~ and in February 1982 the Company sold $75.000.000 j; - The sinking fund requirements wiu begin on July 1,' 1984 : principal amount of first mortgage bonds.17% Series and will amount to $900.000. $4.213.000 and 54.213.000 due 1992. y for 1984.1985 and 1986. respectwely. m - ~7f The 51.80 Series is convertible at any time into Common d M f.mh Mhl8D'd Stock at a price of 515.125 per share. Holders will receive Ohio' Edison Energy Trust (Trust) s C one share of Common Stock for each share of 51.80 Pref-In November 1980, the Trust was created for financing part 4 erence Stock converted, subject to ad,lustment under cer-of the Company's investment in Beaver Vancy Unit No. 2. $ -ztain conditions. ~ The Trust has two lines of revolving cred#t available to it for (f) Longterm Debt $400.000.000 and $100.000.000. The latter credit also The mortgages and their supplemenc which secure aR of serves as a stand-by facility in connection with Trust ar-4, the Companies' first mortgage bonds serve as a direct first commercial paper sales; total borrowings under that credit mortgage lien on substantially all property and franchises. and commercial paper outstanding may not exceed G other than specifically excepted property, owned by the $100.000.000 at any time. respectue Companies. The Company has transferred its interest in Beaver Valley N Based on the amount of bonds authenticated by the Unit No. 2 (exclusive of common facilrties and transmission Trustees through December 31.1981. the Companies' arf facilites) to the Trust, where the assets are used to secure 1 p -. nual sinking and improvement fund requirements amount Trust borrowings. All Trust obhgations will be assumed by 1 to $21.187.000. The Company contemplates that funds the Company when they become due but not later than Q 1 deposited in 1982 will be withdrawn upon the surrender December 31,1986. At the Company's option. all oblega-A for cancellation of a like principal amount of bonds, which tions outstanding under the $400.000.000 revolving credit 2 are specifically authenticated for such purposes against urF arrangement may be converted into a four-year term loan funded property addrtions or against previously retired to the Company. bonds. These methods can result in minor increases in the The Company accrues interest apphcable to the Trust 2, amount of the annual sinking fund requirements. Penn which is subsequently capitalized, net of income tax efTect. 11 Power contemplates that its requirements will be satisfied in interest on borrowings ursder the 5400.000.000 hne of ? 1982 by permanently waiving its right to issue bonds credit is computed at the applicable prevailing pnme interest ,c - against $2.439.000 of the 56.120.000 of retired bonds that rate plus 1/4 %. plus a commitment fee of 1/2% on the un-are presently available for that purpose. Under its mort-used portion of this line. No direct borrowings are expected - 4 gage. Penn Power is also permitted to fulfillits requirements to be made against the $100.000.000 line of credet. but the f. by the issuance of bonds against unfunded property add" Trust will issue and have outstanding commercial paper @q tions in the same manner as described above for the supported by this facihty. To the extent that borrowings are Company. less than the $100.000.000 available under this line of m .~. As of December 31. 1981. the Companies' sinking and credit, the Company must pay a commrtment fee of 1/2%. L irnprovement fund requirements and maturing long-term Under the stand-by support, an irrevocable bank letter of debt for the next five years are; credit will be issued upon which the Trust will pay a fee of

6

.1982................... .... 5 26.992.000 I/8% of the amount of commercial paper notes outstand-41.107.000 ing. The average annual interest rate on Trust borr. Mngs m 1983..t;....... 1.' 9 1994............ 148.013.000 was 18.7% and 21.4% during 1981 and 1980, respec-W 1985.~.1.. l.:... ........... 74.330.000 tivety. Of the 5432.500.000 of Trust obligations outstand-Ws

1986...~..;.................. 107.265.000 ing at December 31.1981. $100.000.000 relates to out-b" I9I Unsecured Notes standing commercW paper and the balance to borrowngs under the 5400.000.000 line of credst.

. Total unsecured notes outstanding at December 31.1981 exclude 575.686.000 of pollution control notes, the pro-- Nuclear Fuel Finindng

1' ceeds of which were then in escrow pending their dis-In December 1901. Ohio Edison Fuel Corporation and 1 ~ bursement for construction of certain pollution control Pennsylvania Power Fuel Corporation (corporations in 9

' facilities. The pollution control revenue bonds to which which the Companies have no ownership interest) were h i these notes relate are entitled to the benefst of an irre-created to provide funds for the procurement of nuclear j W@ vocable bank letter of credit of 5106.375.000. To the extent fuel. The fuel corporations will lease the fuel to the Com-i ' that drawings are made under that letter of credit to pay panies under separate fuel leases which require lease pay-Qi pnnapal of, or interest on, the pollution control revenue ments sufficient to permit the fuel corporatios is to repay the $lMM%- ; H:l5a ' MW& %%- ~ F f-Un,h..h4.m er m> - - '..-4 <.U k M a M g - 35 e- - -i - - ~-

w g m. + .e [qf d M M/@%<w-A C a &b E.Y' $h Y. hf LY n. in s 7 ~ ~- - } ^ obligations. Under ordinary circumstances, the lease pay-applicable to 1982. In additon. the Companes expect to ments_will be made at such time and in such amounts as fund through the Ohio Edison and Pennsylvania Power g will coincide with the burn-up of the nuclear fuel. Fuel Corporatons approximately $ 150.000.000 for the pro-curement of nuclear fuelfrom 1982-1986. of which approx-Financing on behalf of the Company of up tt4135.000.000 5 I is available through the Ohso Edison Fuel Corporaton, imately 555.000.000 is apphcable to 1982. The major por-i lc eliher through revolving credit arrangements or the issu. ton of the Companies' constructon actrvites dunng this I[ ance of commercial paper which is supported by a bank five-year period relates to the CAPCO companes' program L letter of credit. The Company accrues interest apohcable to for the joint development of power generation and the fuel corporation which rs subsequently capitahzed. net transmission facihties, and to bnng the Companes' existing of income tax effect, Interest on bank borrowings is com-9enerating units into comphance with environmental puted at IIO% of the appbcable prevaihng pnme interest regulations. The CAPCO companies have entered into rate plus a commitment fee of 1/8% on the unused porton other commitments (the Companies' share being of the hne of credrt. The fuel corporaton also pays a 5/8% $586.000.000) for the supply of nuclear fuel in connecton g letter of credrt fee on the aggregate amount of outstanding wrth the future commeraal operaton of nuclear generat:ng units. [. borrowings. The average annual interest rate on outstand _ ing borrowings in 1981 was 13.9%. The Companies' financing programs dunng 1982 through 1986 will include the sale or issuance from time to time, of t Pennsylvania Power Fuel Corporation did not make bank L borrowings or issue commercal paper in 1981. Financing appropnate additional amounts of first mortgage bonds. of up to 530.000.000 on behaff of Penn Power win be secured or unsecured pollution control and environmental ( available in 1982 on terms similar to those of the Ohio notes and obhgations. unsecured long-term notes. pre-Edison Fuel CorporaDon. ferred stock. preference stock, common stock and proceedt [, from other long-term finanong arrangements (see Note 5). 7, Mg The Companes are hmited by their respectrve indentures ~ ~' f;.. ; ', W i. and Charters as to the amounts of addrtonal first mortgage 'r f,~ bonds and preferred stock they may issue. The Companes have hnes of credit with domestic banks L that provide for borrowings of up to $287.000.000 at the Quarto Project ) prevaihng prime interest rates. Short-term borrowings may The Companes, together with the other CAPCO com-r i be made under these hnes of credit on the Companes' un-panies. have made long-term coal supply arrangements J sectred notes. All of the current hnes expire December 31, with Quarto. The CAPCO companies have agreed to 1982; however. all unused hnes may be cancelled by the severalty, and not jointfy. guarantee their proportonate Danks. shares of Quarto's debt and lease obhgations incurred The Companes maintain cash balances on deposrt with while developing and equipping the mines. The guar-banks to provide operating funds to assure availabihty of antees will remain even sf environmental regulatons pro-y $207.264.000 of the hnes of credrt and for other banking habit the use of this coal. As of December 31.1981. the i arrangements. Such compensating balances. net of float." Companes' share of the guarantee was 5240.712.000 are expected to be maintarned at an average of approx. ($128.554.000 -long-term debt; 587.658.000-lease g' imately 55.000.000 and are not subject to any contractual obhgatons; and $24.500.000- short-term bank credit). restnction against wrthdrawal. Penn Power as required to The guarantee is expected to increase to 5250.000.000 t pay commitment fees that vary from a flat rate of 1/2% to a based on budgeted mine construction costs of vanable rate of 8% of the appbcabie pnme interest rate to 5431.000.000. assure the availabihty of 521.000.000 of the hnes of credrt. Under the terms of the coal supply contracts. which expire v 1 The Company also has a $30.000.000. Eurodol!ar kne of December 31.1999, the Companes must reimburse Quarto credit from a group of fore #gn banks. Amounts borrowed for their share of ine costs of operating the Quarto mines. J are for a perod of one. three or six months, and are including those costs assocated wrth mine construction. i renewable at the Company's opton. The interest rate is whether or not they receive coal from Quarto. The Com-currently 5/8% above the London Interbank Offered Rate. panies' tota! payments under these contracts amounted to ,t The Company is also required to pay a commitment fee of $94.379.000 dunng 1981. The Companes' minimum pay-t. 1/2% on the unused portion of this credrt hne. There were ments under the coal supply contracts related to mine con-structon costs are; no borrowings under this credit arrangement at December p 31.1981 or 1980. The revolving credrt faolity expires in 1982. .5 26.306.000 ) August 1982. 1983... 25.687.000 _m 1984.,. .25.069.000 l ,1- .-r ' Sai

• M. w..

1985. 24.451.000 h ' @'d 1986.. .23.833.000 -) Years thereafter. .279.680.000 L Construction Program J The Companies expect to spend approximately Based on recent studes concerning the economics of the 52.800.000.000 for property additions and improvements Quarte project and the vanous afternatives available to from 1982-1986. of which approximately 5671.000.000 is provide the long-term fuel requirements of the Bruce . G -.. . Q. a.- ~. _. ~ - _ _ww ~_ w _ we, li_.. -

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n :~ ; G', ,-.2 m.. ~.. .. m ?- ' } }g;.; ; w $ - [ ? f i f y,,.7, x a 4 *- ic_rg s ~ .;~ ~, w % ,,: 4 g n.;n.,,,. 2 - w n g y v. - ~. l' 'e -;y y.' m n c c Mansfield Plant, the coal supply contracts were amended . ing costs would increase substantially. Penn Power expects and changes were made in the mode of operation of the, that the impact of any such capital and operaung expends-R, Quarto mines which have the effect of reducing the annual tures would eventually be reflected in its rate schedules. 4 tonnage production of these mines. Additional coal re-- quirements for the Bruce Mansfield Plant are currently. On December 16. 1981. the United States Environmental i 9~ being procured in the open market and the Company is

Protection Agency (EPA) approved a change in the presently continuing to evaluate the alternatives for making Pennsylvania State implementation Plan (SIP) affecting f

additional arrangements to fulfill, together with the use of. Penn Power's New Castle Plant. The sulfur doxide (SO,) ' emission standard formerly in effect was shown to be more [. coal from the Quarto project. the long-term fuel require- ' stnngent than necessary to meet the Federal ambent air ments of the Bruce Mansfield Plant. These changes are part l ^ of a fuel procurement strategy designed to reduce the . standards. This SIP revision enables the Plant to continue to h; weighted average price of coal used at the Bruce Manfeld burn the low sulfur coalit is now burning to meet the new 50 emission standard. The SIP revison was effective on Plant. The Company will continue to monitor the Quarto 2 C project and conduct such addroonal studes of the eco. Jamary 15,1982. f nomics of the project as are deemed warranted by circum- - In a legal proceeding against Penn Power under the Clean stances. Any acton by the Company affecting the Ouarto Air Act, the Federal government is asking the court to project as a result of such studes will now have to take into i assess civil penalties for alleged continuing votatons of 50, account the possible impact of the Ohio Supreme Court de-emisson regulations at Penn Power's New Castle Plant. cision referred to in Note 2. The Clean Air Act Amendments, which became effective in f The current pnce of Quarto coal to the Companies es based August 1977, permit the imposition of crvit penattes of up on among other things. the actual producnon costs plus to $25,000 per day of violaton. Because Penn Power as in amortization of certain producton expenses which were compliance with the revised emission standard (as detailed not included in the pnce of coal to the Companies dunng above), it is expected that this legal proceeding will be ter-the development penod, which ended on May 31.1980. minated without the impositen of significant avd penartes The current pnce of Quarto coal exceeds the current gen. or the neces-ity to shut down coaFrited capaaty. ' -. erally prevailing market pnce of coal. Both the PUCO and ' ( 'I the PPUC presently limit the recovery of the cost of Quart. Final regulations implementing certain provisons of the T' coal to the generally prevaihng market pnce of comparabie Clean Air Act Amendments of 1977 have now been prom-coal. Reference is made to Note I for a discussion of PUCO ulgated which provide for the impositon of noncomphance 3 and PPUC orders wrth respect to the cost of Quarto coal Pmames based m any ecmomt benefa reaved h the operator of a pollution source as a result of failure to com-currently being recovered from customers. The Company believes that the present PUCO method for recovery of the ply with po!!ution control laws and regulanons a'ter costs of Quarto coal including recovery of the deferred January 1,1981. The Companies have fded Pe0 Dons lor costs, may not be appropriate under the reduced mode of Review of these regulations. The Companies did not I operaton of the mines because this method is not con-ahe came e au W Wems W Jamary 1. sistent with the fuel procurement strategy for reducing the 1981 so that such penalties could be sought against them. but the Companes cannot determine at this Ome whether overall cost of coal for the Bruce Mansfeld Plant and may e or, ey are me amomt of ecmomic &nefa result in further accumulaton of deferred costs. Despite the I delays in the final resolution of these matters by the PUCO that could be established. If sought and imposed. such pen-and PPUC. the Company has no reason to beleve that altes could be significant. However, the EPA has acknowl-b their ultimate disposroon by the PUCO and PPUC will have edged in an earler settlemera of proceedings involving the Ohio Plants that its policy is to assign a low enforcement b a matenal adverse effect upon the Company's consohdated N financial condrton. pnonty to companies in comphance with outstanding con-1 %~ sent orders such as emboded in those settlements. b l'G Environmental Matters On December 19, 1980, the Commonwealth of N Various Federal, state and local authorities regulate the_ Pennsylvania petitoned the EPA to make findings under Companies with regard to air and water quahty and other Secton 126 of the Clean Air Act. Secten 126 provides a G environmental matters. The Companies estimate that com-remedy for a downwind State that can show adverse im-W pliance requires capital expenditures of approximately pact because air polluton regulations in an upwind State 1 5628.000.000 for projects remaining to be completed. Of _ cause nonattainment in the downwind State. Penn-k this amount approximately 5193.000.000 was spent pror, sylvania's petition complains of excessive particuiate and j t to 1982. and $435.000.000 is included in the above con-50, emissions from a number of sources in Oho and West b struction estimate for 1982 through 1986. Capital expen-Virginia. including potentially all of the Companes' Oho k ) dstures for environmental improvements amounted to 1 plants. The States of New York and Maine have filed similar 5119.353.000 in 1981. If Penn Power is required to install peDtons. The Secten 126 proceeding could ultimately re-h.. off-stream coohng in connecton with the operation of the, sult in the revision of the particulate and SO, emtssion ' C New Castle Plant. costs estimated between $13.800.000 limitatens for these plants. to make them more stnngent. and $31.500.000. depending on the required thermal . The Company is unable to predict the outcome of this i N hmrtations, would be incurred. In addition, annual operat-proceeding.

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~ s 1 +,. ^ Other Legal Actions and Complaints chased replacement power dunng the outage. The PPUC is '~ in 1977, the Boroughs of Ellwood City and Grove City, currently investigating Penn Power's liabilrty for the outage M Pennsyfvania. filed a complaint against Penn Power, alleg-and whether refunds are due to Penn Power's customers ing that Penn Power, individually and in conspiracy with for purchased replacement power expenses incurred dur-the Company and other CAPCO companies has violated ing the outage which were included in its energy clause. If Sections 4 and 16 of the Clayton Act by restraining and Penn Power is required at some future time to make such a monopolizing trade and commerce in alleged markets for refund. it is not expected that the amount would be mate-electric power. Damages of $7,000.000 (to be trebled) and rial to the Company's consoldated results of operatons. In injunctions against the alleged unlawful acts are sought. In a separate investigation the PPUC is considering whether 1979, the Court granted summaryjudgment in favor of additional construction costs which resulted from deferral Penn Power as to certain allegations of the complaint. of construction projects should be excluded from rate base Management is unable to predict the ultimate outcome of in future rate proceedings. this action. [- The PPUC is investigating an outage of Beaver Valley Unit ,g g No. I which occurred dunng the pered Mosch-August q ; %.11 v ' ' 1 /'W'+ 1979. The outage had been ordered by the Nuclear The Company purchased and subsequently retired s Regulatory Commission to analyze possible seismic defi-565.821.000 principal amount of its outstanding first mort-ciences of safety-related piping and pipe supports in the gage bonds during 1981. This resulted in a gain of Unit. The PPUC has ordered that the operating company of $26.276.000, which is included as an extraordinary item, 4 the Unit refund an as yet undetermined amount to that net of related income taxes of $12.234.000. on the 1981 company's customers based upon expendrtures for pur-Statement of Consolidated Income. 4 Y.. ?.- W y,, .. a, - ,. M.m. %. b w g The following summanzes consolidated operating results for the four quarters of 1981 and 1980. Three Months Ended [' March 31. June 30. scorerreer Decerrter March 31. Jme 30. Septerter Decerter i9en 198 30 :98

31. 1981 1980 1980 30 1980 31.1980 (in thousands, except per share amounts)

Operaong Revenues 5308.837 5293.500 $337.249 5340.063 5279.789 5252.808 5274.981 5273.291 e Open.ongExpensesandTaxes. 254 891 237.668 270.449 264.260 232.155 217.633 231.853 234 845 ~~ Operaongincome(q. 53.946 55.832 66.800 75.803 47.634 40.I75 43.128 38.446 Otherincome and Deduccons 27.994 29.212 35.860 37.736 23.023 23.147 25.189 25.477 Netinterest and Other Charges. 44.729 49.225 51.049 55.160 28.732 32.272 36.307 33.758 ? Income Before Extraordinary 37.211 35.819 51.611 58.379 41.925 31.050 32.010 30.165 item. Extraordinaryitem. 9.516 4.526 { Netincome 5 46.727 5 40.345 5 SI.6tl 5 58.379 5 41.925 5 31 050 5 32 010 5 30 165 NetincomeforCommonstock. 1 38.354 5 32.042 5 43.369 s 50.I27 5 33.434 5 22.590 5 23.607 5 21.772 Weighted Average Number of shares of Common stock Outstanding. 68.844 69 585 70.410 75.881 64.227 66.897 67.462 68.145 Earnings per Share of Common Stock: income Before Extraordnary Rem (after preferred and preference stock onodend regurementsll%..... $.42 5.40 $.62 5.66 5.52 5.34 s.35 s.32 Extraordinaryitem. .I4 .06 Q ^ NetincomeforCommonStock. s.56 5.46 s.62 s 66 5 52 s.34 5.35 5 32 (g Results for the three months ended December 31.1981 indude previousry accrued Pennsyfvania Exose Tax on Gross Receipts a credit of approximately 57.012.000 (5.09 per share of com-(see Statements of Consoldated Taxes). mon stock). net of income taxes, applicable to the reversal of @J., 7?n O'. 3 7-Q,, /, ; a, s ...g,' f ..? i Statement of Financial Accounting Standards No. 33. changes in pnces on property, plant and equipment. This Financial Reporting and Changing Prices" (SFAS No. 33), data is presented in accordance wrth SFAS No. 33. ]" provides for the preparation of supplementary financial in-however, it is not intended as a substitute for camings formation to disclose the estimated effects of inflation and reported on a historical cost basis. a, -~. c: w w 1.. w.,- : .u a. w : L

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~ ~.. -e. '- o g g.e c., ~ . ~.. m w w.~~=c-~~: - ~~~:~.- }.,_.., C ~.: y 4 -. .y y, e a l c., - k i 4 Adjusted for the Effects of Changing Prices For the Year Ended December 31.1981 On Thousands)(Unaudsted) Y As Reported Adjusted for 'i F& N on the Pnmary Adjusted for Change n Consolidated General Spec 6c Pnces Statements inflacon (Current Coso ?- (Average 1988 Donars) Operaung Revenues. S t.279.649 $ 1.279.649 51.279 649 Operaong Expenses and Taxes-Operaoonandmantenance. 762.307 762.307 762.307 [ Provisaon for deprecaoon and EJ amorazaoon 99.825 200.527 225.247 Generaltaxes 84.316 84.316 84.316 income taxes. 80.820 80.820 80 820 I,~ Totaloperanng expenses and taxes I.027.268 f.127.970 1.152 690 Operanngincome. 252.388 151.679 126.959 Other encome and Deducoons.. Netinterest and Otner Charges. 13o.802 130.802 130 802 200.I63 200.I63 200.163 Preferred and Preference Stock Devidend Requrements.... 33.170 33.170 33.I70 income from Cononung Operaoons (excludog reducnon to net recoverable cos0 1 149.850 5 49.148 0 1 24.428 increase in spectic pnces (current cosQ ci property, piant and equipment heid dunng tneyear (d)........... s 562.450 ReducDon to net recoverable cost. 5 (210.755) (149.2I3) Effect of ncrease n the general pnce level on property plant and equipment (599 27h Excess of ncrease an the general pnce level over ncrease n spectic pnces of property. plant and equipment after reducoon to net recoverable cost......... (I86.035) Advantage resu!Dng from the decrease n I purchasng power of net monetary hatxhoes 215.268 215.268 Net.. 5 4.513 $ 29.233 C rnnang er maxnon m nre moeme cos. ire excre Itas earn ccrwwg opremurs =>nro u greca avunan wcud rme tem His teo71xx3 p At Dacemte D. net pcseny punt avr casrcs net cv acoru.mt orpr.cuacrt apuro scr changri rusmst pmes itums com *as s 7.47s 533 oco wmr Neonts coninenetoeme com was sis 74 ris cao ty > Five-Year Comparison of Selected Supplementary Financial Data (Unaudited) Adjusted for the Effects of Changrng Prices Year Ended December 31. 1981 1980 1979 1978 1977 t OPERATING REVENUES On Thousands) As reported on the pnmary conschdated statements 51.279.649 51.080.869 $ 994.585 5 862.956 $ 796.289 Adjusted to average 1981 donars. $ l.279.649 51.192.985 11.246.205 11.203.015 51.195.092 = Hf5TORfCAL COST INFORMATION ADJUSTED FOR GENERAL INFLATION Cn Average 1981 Dollars) Income from cononung operacons (excludng reducDon to net L. recoveratHe cosQ On thousands). 1 49.I48 $ 23.064 $ 52.406 arr./ne from cononuing operacons per common share (excluding reducDon to net recoverabie cost) $.69 5.35 5.90 E' CURRENT COST INFORMATION Cn Average 1981 Dollars) income poss) from corionung operacons (excludog reducDon to net recoverable coso(in thousands). income (loss) from contnuing operacons per common share..... $ 24.428 5 (I3.602) $ 17.735 l (excluding reducDon to net recoverable coso 3.34 $(.20) $.30 t Excess of ncrease in the general pnce levet over increase [ n spectic pnces of property, plant and equipment after reducttn to net recoverable cost (In thousands) 1 (186.035) $ (290.628) $ (335.113) (/ OTHER INFORMATION Common h irvib' equity at December 31 at net p. recoverable cost On thousands of Average 1981 Donars)..... . S I.190. I26 si.I 19.597 51.158.691 Advantage resulting from the decrease n purchasng power i o' net monetary habdroes 0n thousands of Average 1981 Domars) $ 215.268 5 279.494 5 309.809 Cash drvidends dectared per common share-( As reported 51.76 51.76 31.76 51.76 51.715 Adjusted to average 1981 domars............ $ 1.75 $ 1.92 $2.20 $2.43 $2.56

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Market pnce per common share at December 31-p,, As reported $ 11.625 511.875 513.375 114.875 519 50 Adjusted to average 1981 donars.. $ 11.25 $ 12.52 515.85 $ 19.98 $28 54 i Average consumer pnce ndex. 272.4 246.8 217.4 195 4 i8I.5 + 3 u. w, 39

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a i t ~ t p A y i1, 4 ~.s s. 7 q. ':,.r-sThe Consumer Price lndex for A!! Urban Consumers (CPI-U), rese.fve balance for the respectrve year to determine the A N'a was used for converting actual dolfars spent for property, composite current cost accumulated provision for L' ptarit and equipment into average 1981 dollars. This adjust-depreciation. ment illustrates the esumated effect that inflation has had The total provision for income taxes has not been adjusted 7' upon the Companies' pnncipal assets.. for generd inflation or changing pnces, in conformity with The Handy-Whitman index of Public Utility Construction the reporting requirements of SFAS No. 33. O, Costs for the North Central Divison and the Bureau of ~ The reduction to net recoverable cost arises because the Labor and Statistics engineenng indices were used to current rate making pohcies to which tt.e Companies are calculate the current cost of property, plant and equipment-subject allow recovery through revenues af only the hrs-excluding land. These irdces were appled to actual do!!ars torical cost of utilrty property. Dunng inflatx. wry penods. ? spent on large construction projects according to the year however, the investment necessary to replact that prop-C of expendtture. Current cost of a!I other constructen proj-erty will be more than its original cost. In order te property h. ects was based upon onginal cost in the year of its transfer reflect property, plant and equipment at sts econonX value g to plant in service. The current cost of land is the same as to the Companies, the adjustment for reducten a net the computed amount adjusted for general inflation. The recoverable cost must be made due to the additonal con-J current cost adjustment reflects the approximate dollars straints present in the rate malung process. that would have to be spent today to acquire property. Consolidated net monetary habilrtes consist pnmanly of plant and equipment idenocal to assets currently owned long-term debt and preferred stock. Dunng inflanonary ( Depreciation expense was determined using the same rates penods, net monetary habilttes will be repaid wrth dollars i and methods under general inflation and changing pnces having less purchasing power than dollars had when the i as the provision for depreciation reported on the pnmary habihtes were originally incurred. Adjustment for the ad consolidated financial statements. The accumulated provi-vantage resulting from the decrease in purchasing power sion for depreciation was esumated by using the Handy-of net monetary habihties is necessary to adequately reflect C Whitman Index. A theoreDcal reserve balance was esti-these differences and serves to partially offset the adverse L, mated for each class of property by year that the property inflaconary effects of replacing the Companies' property, q' was placed in service. The index was then appled to each plant and equipment. ) h } b r,y 1 h b ARTHUR ANDERSEN & CO. i 1345 Avenue of the Amencas i. New York, N.Y.10105 ?- To the Stockholders and Board of Directors of Oho Edison [' Company-f We have examined the consondated balance sheets and covery of these costs from its retal customers in future rate statements of consohdated capitaleacon of Ohio Ed: son Com-cases is uncertain at thrs time. In add: ton to the unamortzed + [:; pany (an Oho corporaton) and its subsidiary companies as of costs incurred by the Company, there are also asserted claims December 31.1981 and 1980. and the related statements of related to oetays n and the terminanon of the units. which y consolidated income, retained eamings capstal stock and may result n the incurrence of addroonal costs. the amount of iL ' other paid-in capital, sources of funds for gross property addi-which cannot be determined at this ame. tions and taxes for eacn of the three years n the penod ended in our opnion. subject to the effect of such adjustments, f December 31.1981. Our examnacons were made in accord-any, that might have been required had the outcome of the A-ance with genera!!y accepted aud40ng standards and, accord-matters referred to in the precedng paragraph been known [ ingfy, induded such tests of the accounting records and such the fnancal statements referred to above present farty the ( other audttng procedures as we considered necessary in the fnancial posioon of Oho Edtson Company and ts subsdary y-companes as of December 31.1981, and 1980. and the re-arcumstances. As discussed more fully in Note 2 to the consohdated financial sults of their operacons and the sources of funds for gross 7 statements. the Company has incurred construccon costs re-property additions for each of the three years in the penod y lated to four nuclear units which were terminated in earty ended December 31.1981, in conformsty with generalty ac-b 1980. Pursuant to a Public Utilstes Commission of Ohio cepted accounting pnnopies appled on a consistent basis. (PUCOJ order, the Compaqy had been recovenng these costs Y from its customers over a ter> year penod Dunng 1981 the ) F Ohio Supreme Court ruled ti a case involving another Ohio /) f utilsty company that the PUCO had exceeded its authonty in Q, W allowing these costs as service related costs in that company's f;,, rate case. How that deason will affect the Company's re. February 12.1982. 4~ V s, 3 / 4Q ,l v a&, - - w .a. a. ~.. -..-. l cw e,.,, ;s,w ~ .w~

' y (' p:.y.hW)yw.3 :.3: ~.,w'g q ^ '.. : ;

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ym.z,;. p ' o c - ~pg: q '= *- y;.h.v n.d.Mh bA Gzb; dJ.L.KM h.mm.Z 'l.C....h, y ;sd1C,,.,6..,a.___..- ,g.. .... r., w y.: w: n . c:q na y ~.. .-v L; e u;;. ; m .x w w y:. m. w . m..y y..m gn .: y m. w n m. ~,, ~,e-m.,, g h, h h .h h I h k h ;' [ Ohio Edison $v. ^ @ s h M N I $ d I k.?NNNh$ ..f s u

f General Financiallnformation

~M' 1981 s .1980 .1979

• 1978 1977 1976 1971 TotalOperabng.

Fy,L 7.' 4 S Revenues 000)...... t h.*..!.. 7/i. S t.279,649, S t.080.869 $ 994.585 5 862.956 5 796.289 5 644.852 5 308.82' Operaongincome 000).."..h..B.... ;,8 252.38tf'. 5 169.383 163.744 .5 123.945 5 146.508 5 122.217 5 68.130 Net income Ibr Common i 54 e m - : ' 101.403 [5 305.I20 $ 161.259 s 87.863 s 82.777 5 45.778 l Stock l000) ~. J,... J J. :....... r2.'.. ~ / $ 163A92 'y. + S '.^' a. ' J ' ',5, M. ' ',. J. Rabo of Net income ?c t-i . ~

a. -

.4 + zr for Common Stock to A' Operaong Revenues.... c.,......... y - 12A% ; 9.4% 10.6% ' 7.1 % llJO% 12R% I42% t' Times Interest Eamal rR y ~ 8efore income Tax. ; c.... 1;

2.11x -. % 2D5x 23fx 1.67x 238x 2.22x 3 4fx

~ Net Unity Plant at i y December 3 l l000)...... :. /. 2'.. 53A67,757 ' 53.435.267 53.012.197 52.717.820 52.403.810 $2.115.798 51.047.217 Gross Property ~. p AdGDonsl000)......:.... S 568.044. S' 515.020 " $ 476.746 5 395.I62 5 358.I05 5 325.553 5 156.045 ,4 i Capelizabon at t ~ December 31: l000) '~'r Common Siudumi Equty....... S t.228.486 $ 1.066.957 5 969.543 5 851.119 5 866.725 $ 634.707 5 350.121 Preferred Stock Not 52pect to Mandatory Redempoon.......'. 304.798 307.472 307.472 307.472 262.472 262.472 83.803 j D,4.29s ' p-Preferred Stock Subrect J to uandatory Redenpoon...... 99.200 - 93.600 98.000 98.000 88.000 i."' Preference Stock Sutvect J r ', to Mandatory Redempoon.... 56A43 57.250 57.250 Longterm Debt............ 1.759.77I I.594384 1.410.782 1.343.195 I.189.821 1.087.755 557.I40 t if Total W "-............... 33.444.196 53.125.263 $2.838.647 52.599.786 52.417.018 52.072.934 5 991.064 'j~ Capaalizanon Ranos at December 31; Common StuGumT Equay... 35.7 % ' 34.2% 34.2 % 32.7 % 35.9 % 30 6 % 353 % Preferred Stock Not 52pect r toMandatoryRedempoon... SA 93 IOR I1 A 10.9 12.7 8.5 (' Preferred Stock Subrect ,^ 2J, 3.2 33 3B 4D 4.2 to Mandatory Redempoon Preference Stock Subrect to Mandatory Redempoon

' IJ IA 2.0 a

Longterm Debt.. 51.1 51.0 49.7 S t.7 49.2 52 5 56 2 r TotalCapcakzanon. '. ~... '. 100.0 % 100.0 % 100.0 % 100.0 % 100 0 % 100 0 % 100 0 % Longterm Obbgaoons f at December 31 4000).....,... 8447,444 $265.000 Cost of Preferred & ,.T Preference Stock g OutstanengatDecember31... SJ7% 838%' .836% 7.99 % 7AS% 7A4% 4.94 % ,j Cost of Long-Term Debt ' l' Outstanong ar December 31......... 9.99% 9.16% 8.13 % 7.71 % 7.45 % 7.47% 5.71 % ? Common Stock Data Eamrigs per Average K' Common Share.......... '..... _ $2.30 ' $1.52

• 5120 51.19

$ 1.97 52.14 $ 1.78 g Return on Average. / C Common Equity. 0-Dmdends Pad Per ......, - J 144% 9.7% 112 % 7.1 % II.7 % 13.9 % 13.2 % . $ 1.76 ' - 51.76 $ 1.76 $1.76 51.715 51.67 51.54 Share................ t. f. Common Stock Dmdend . 77 % '116 % 98 % 148 % 87 % 78 % 87% Nl Payout Rabo................ Common Stock DMdend Y Yeld at Decerreer31 15.f% 14A% 13.2 % II A% 9.0% 8.1 % 63% Pnce/Earnwigs Ratioat December 31. _q 5.1 7A - 7.4 12.5 9.9 9.8 13E Shares of Common Stock Outstarong at December 3 t l000). J..., 73.676' 68.526 .59.622 52.120 51.207 39.856 25.695 Book Value per Common .J, ,~ $ 15.57 - $ 16.26 516.33 516.93 515.93 $ 13.63 p' Share ar December 31. .8154f l'. Market Price per Common c l Share at December 31............ c.. w 811 425 Sil A75 ; $13.375 $14E75 519.50 520E75 $24.50 l Rano of Market Pnce to 8cok V # ' !p ' Value per Share at Decerreer 31....,.y,. 74% ., y - 76% 82 % 91 % IIS% 13I % 180 % + ,,P JE 37 g ..g.* -w +. ~ "y 3' CM-f 7 g',h;,.$%.'f MW QMyp' Tp3 m' i;:4 ?. b AI ~ i a b ',! ^ Y~l - ? sp. Le e,.a.w..A. w,... r . _. /; .,g. v u m a.~ + - w.AL_3 =c - www + _.mt _n +u._ a.

kR M:jb*:,3f..'.:.l7% < &;1 Mi.ad.*A&ML:s hw..n.w L.. 3% 9 M.wh ',pl; ,':~ e g cyfuryn,?::GM.w,24 W W. tux.k :.Q. Ln xmpp'..m q wyp:y'gg.n. r 7 .n: t <,a7 + ~ ,s . w;1 9Q> - '.tg' L m 3. v. F. .* tls. ~, 3C..; x, N .,,'r :e t s [ f O pk3-f. O-p .gggg ~, 39go 3979 3973 3977 3976 1971 ' n .z... Revenue From Becmc ,t~2 pyvig* .t [.-f ',' >)

• }

.g $3lgg. q. 0 's i a 1 Y.M.O '" Residential '.... u... ;..' N.' i.. 8 442.267 .5 398.832 5360.273 5314.867 $284.512 5232.433 5I14.001 5 ". ' " ; [Commerdal. n..'.',. ; > ..c.,.. 30s.599 , 268.788 240.458 205.901 191.38I 155.572 79.858 ' ', ~ i ~. {S J - _ % Industrial.........'.,.. M,... 381,162 330.717 335.185 258.767 236.434 195.311 92.692 .O - - ~- ,, c.ther ~...... t.. p,............ 53.993 50.420 42.607 46.471 31.744 3I.013 13.053

n.,

.e Setzal...~.....a...,... 1,186.021 1.048.757 958.523 826.006 744.071 614.329 299.684 '.d, ' ~5aiestoutmoes'.',. ...'.,..s.... 73.966 12.38I 10.185 9.346 7.825 6.749 2.28I i ( E..,,;'

m. -..

m ' Total..'....... a.. G. a...... 51,259.987 51.06l.138 $968.708 5835.352 5751.896 5621 078 530l.965 s_ e. w yf. Rever ve From Bectre ' pfM ; - 54 5-%:'t s - T g.>- Resdermal.....,... 35.1 % . 37.6% 37.2 % 37.7% 37.8 % 37.4 % 37 8 % Commerdal..... ...L....... 24J 253 24 3 24.6 25.5 25.1 26 4 l " industnal. ~ 30.2 31.2 32.5 3 I.0 31.5 31.4 30 7 Uy ' 'Ottv r.... 1 ;...... r.,.~. Y' 5& total ...il.. ' 4.3 4.7 4.4 5.6 42 50 4.3 94.1 98E 98.9 98 9 99 0 98.9 99.2 /', ' Sales to utibDes.'......,... 5.9 f.2 1.1 f.I I.0 1.1 08 @[- .. Total..,,j e.. M.........'..; 100.0 % 100.0 % 100 0 % 100 0 % 100 0 % 100 0 % w00% y~ g-hattHourN N'+ * ^ .fr (MAons) ~ 6.80I 6.650 6.501 6.334 6.024 4.656 [,.. Commeraal.... ;....,. n. s ' 4,917 4.812 4.693 4.470 4.54 9 4.358 3.421 Resdencal........ '... '.. 6.747 p E.' A andusmal. 9,352 8.909 9.830 9.600 9.67I 9.262 8.548 C. Other. .~..... 1,t st ' t.370 I.346 I.309 f.253 1.171 933 P Setotal 22.197 -21.892 22.519 21.880 2I.807 20.815 17.558 [ Sales to UDhoes .y......... 2.465 502 448 429 422 387 260 Total. ......c........ 24,662 22.394 22.960 22.309 22.229 21.202 17.818 rC. Customers Served at t. December 31: [' Resdennal... c.... 372.303 867.447 861.I96 848.268 836.500 824.851 743.532 ',4 Commerda!..,....... _... 89.231 88.505 87.425 86.410 85.002 85.512 77.955 I'. Industnal.. 1.068 1.059 1.161

f. I60 I.147 I.fll 1.094 Other Fit 704 693 689 682 681 554 L"

Total... 963.313 957.7I5 950.475 936.527 923.33! 9I2. I 55 823.135 g Average Annual Resdential KWH Usage.. -7,760 - 7.870 7.780 7.724 7.637 7.361 6.345 f' Average ResdenDal Pnce lv

• Per KWH.

6.564 5.864 5.42t 4 348 4.494 3.868 2 45t Cost of Coal per Meon8TU.,

1... ';..

81.01 51.50 $1.26 $ 1.16 5.96 5.93 5.29 Generaong Capablity at December 31:(Megawatts) - " t Coal 4.907 4.899 4.861 4.86I 4.861 4.481 3.793 .[ ' Oil. ;.... ..s... 354 ' 364 423 423 423 423 6 p /~ - Nudear. ..y.... 425 425 425 420

• 20 190

@?. l Total. 5.686 5.688 5.709 5.704 5.704 5.094 3.799 + Sources of Electnc Generation. - in. " ' Coal... 89.9 % 98.7 % 93.9 % 90.4 % ~ 90 0 % 96.3 % 100 0 % b

01....

~0.2. 0.6 2.0 3.5 2.6 2.5 [,' Nuclear. 9.9 0.7 4.I 6.1 7.4 1.2 s, p] ; Total........,, 100.0 % 100 0 % 100 0 % 100 0 % 100 0 % 100 0 % 100 0 % 4 Peak t.oad-Megawatts....

t..

4,148 4.210 4.105 4.038 4.I34 3.817 3.307 Number of Empsoyees,

y..

at December 31... ...a 7,669 ~ . 7.503 7.157 6.765 6.609 6.241 5.892 N* ) .5 s" y j.; 3., ir ' G,.. 0 q Ny, .A: M 't.-

r. p' s

-. 7 tg, c,. g 4, ..As s e' 4-s.. c. c:m y w gg'.=gege n f3. m -- g42 a; ._y< x mWh2:.a :.s:il.,2.w w um 1.aw... =

Stockholder Information Stock Transfer and Registration a price equalto 95 peicent of market Agents value. Stockholders partripatng in the Plan may buy additonal shares at a pnce equal Infom1ation and assistance pertaining to to 97 percent of market value througn the transfer or registration of all classes of optional cash payments of up to $40.000 { Company stock can be obtained by ce per year. tacting one of the following Transfer The Plan is being amended so that. Agents or Registrar of Oho Edism commencog in early 1982. preferred and ComparY preference stockholders will be elgible to Transfer Clerk p rtiopate. The purchase pr.ce of common Ohio Edison Company stock purchased with reinvested preferred 76 South Main Street r preference stock dudends wdl be equal Akron. OH 44308 to 100 percent of market value. An added benefit of the Plan may be ContnentalStock Transfer & available from 1982 through 1985. The Trust Company Economic Recovery Tax Act of 1981 pro-19 Rector Street vides that partopants of quahfed drvdend New York. NY 10006 renvestment plans. such as that offered by Ohio Edison, may elect to exclude up to BancOhio NationalBank $ 750 a year (51.500 on apnt retum) of One Cascade Plaza divdends that are reinvested. The Com-Akron. OH 44308 pany antcipates that a substantial porton of common stock dudends pad in 1982 Stock Listing will be a return of capital. and thus non-At the end of 1981, the Company had taxable wholly apart from the provisons of 79.675.703 shares of common stock the Act. If any part of a drvdend is deter-outstanding, owned by 182.778 holders of mined to be a mum of capaal. paepants record' shovd consut M own tax advisers m the extent to which the electon to exclude The Company s common stock is listed divdends should be made on the New York and MdweU Stock in additon to the benefit of tax deferral. Exchanges and traded on other registered exchanges under the ticker symbol OEC. ( certain requirements are met with respect Newspaper stock Irstings generally use the to holding penods for the Company's ( symbol Oho Ed. common stock. the proceeds of a sale of stock purchased under the Plan may be Annual Meeting of Stockholders 'h9'ble f N ng-mm capaal gan neaunent. Stock purchased wrth reinvested devdends The 1982 Annual Meeting of Stock-will have a zero tax basts to stockholders. holders will be held on Thursday. Apnl 29. Add, tonal nformaton about the Plan at 1:30 p.m. at Ohio Edison's General and a Prospectus can be obtained by Offce in Akron. Ohio. Stockholders unable wnting to Stockholder Servces or by calhng or choosing not to attend the meeting can 1 216-384-5513. vote on the stems of business presented at the meetng by filling out and returning the Dividend Income Taxability proxy card that is mailed to each stock-Common stock divdend payments dur-holder apprciximately 30 days pror to the ing 1981 are 100 percent a return of capital meeung date. and, therefore, nontaxable for federal income tax purposes. Preferer ce stock Dividend Reinvestment and Stock divdends for 1981 are 81 percent return of Purchase Plan capital and nontaxable for that porton. The Ohio Edison Divdend Renvestment Preferred stock drvdend payments dunng and Stock Purchase Plan rarsed $35.9 1981 are 100 percent taxable. melon of new caprtalin 1981. up 21 These percentages are subject to final percent over 1980. determinaton by the Internal Revenue A total of 37.278 participants. or 20 Servce. Stockhoiders will be notted percent of Edison's common stockholders promptly ( the determinaton results n a of record had been enrolled n the Plan by signficant change. the end of the year. By reinvesting their drvidends totakng $22.8 milhon and mak. Availability of Form K)-K ang optonal cash payments of $13.1 A copy of Ohio Edison's 1981 Annual mdhon, partopants purchased 3.122.631 Report to the Securrtes and Excnange additional shares of common stock in 1981. Commisson. Form 10 K. will be provded E Stockholders may invest all or part of without charge to stockholders upon their quarterly dividends automatcally in request. If you would hke to receive a copy addruonal shares of common stock. The of this report, please wnte to Gregory F. purchase pnce of common stock purchased LaFlame. Secretary. Oho Edison Company. with reinvested common stock divdends is 76 South Man Street. Akron. Ohio 44308. 43

O O -O BULK RATE U.S. POSTAGE PAID g AxRon.cu o Permit No. 561 OHIOEMM 76 south Main street Dw Energy AMers Akron, Ohio 44308 l r

l' I

t I. e a h ,ir c: s .r .1..'. i 1 4 1981 Annual Report 1 ow- -4%-

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t, o .s r.. ,.'-,; c - p*: L, r a i 1 A : g-s y 4-y* .gs up r ~ F .~ t i s ) C' s g ~ I.. _b.= hi .a bg - ~- ~ ~ r y: p w (\\ fA N j' Kh?l' w. -- w. i ?. ['jk m l M [ ' # # gjf; '\\ w .e s' y: g e - eS eer -= f O p r~ ~. v w -.k N's $ 1.. L..- O L +. -. ..a. 2 -.~ ~. ~ ~ ^ - w

) Our grimery mission is to suggiy eiectric energy when and where it is needed to nearly three-quarters of a million customers in our f 1,700-square-mile service area. Over a 100-year : pan, our electricity powered the development of Northeastem Ohio's industrial might. Today, that strong industrial base, together with growing service and commercial business segments, promises economic vitality for our area for many years to come. Similarly, our residential customers ~ have depended on us to light, heat and i cool their homes...to cook their food...to wash and dry their clothes...to provide reliable 3 i electricity for a better living standard. Because we are investor-owned, we are obligated to our share owners and bondholders whose investment makes our mission possible. These investors are entitled to a fair retum on their investments. We strive to meet that obligation. t ) li U

cCoomi. Hioiiois nn Highlights 1

• Earnings per share were $2.52, up 11.5% from Financial Summary 1

$2.26 in 1980. Letter to Share Owners 2 . Common Stock dividends per share were Perspective 4 increased 2C per quarter, effective with the The Natural Environment 7 February 15,1982 payment, the 24th consecu-The Financial Environment 11 tive year of increase. The Operating Environment 15

• In the retrial of the City of Cleveland's antitrust The Rate-setting Environment 19 case against the Company, the jury found in Management's Discussion and Analysis favor of the Company; the City has appealed

'ISI "' of Financial Condition and Resuhs of Operations 21

• A al operating revenues surpassed $1 billion f r the first time.

Management's Statement of Responsibility for Financial Statements 24

• A $147.8 million (17%) rate increase became effective for retail electric customers.

Report ofIndependent Accountants 24 Financial Results 25

• Hearings were completed before The Public Financial and Statistical Review 1971-1981 _ 38 Utilities Commission of Ohio for a $130 million (12E increase in retail electric rates; notice of Inflation Accounting 40 n en ra m

n rate Directors and Officers 42 increase was announced. Committees of the Board of Directors 43

• A rec rd peak load of 3,362 megawatts was GeneralInformation 44 recorded in July.

O See ^ree Meg 45

• The 1982-19?f construction program is

$1.8 billion. Qu,velv Hyh h and G ~ng h of Common Wk (d AvH E r ~. Financial Summary i - - - - - - - ~ Per Cent "# p, p% g 1981 1980 Change Earnings Per Share p, in.' of Common Stock 5 2.52 5 2.26 11.5 Dividends Paid Per Share ' to.- b of Common Stock 5 2.08 5 2.00 4.0 1,, Book Value Per Share of Common Stock 5 1963 5 19.72 (0.5) r, Common Stock ( ~m Share Owners 103.242 101.001 2.2 Operanng Revenues (000) 51,012,930 5893.566 13 4 i4 a a 1s, Operating Expenses (000) 5 820.226 5743.051 10 4 i~, i..

4..

Net income (000) 5 155,734 5125.383 24.2 __-,a_. su 5 4,8 iu zoa w 4+ Earnings Available for 14 ia m em Common Stock (000) 5 120,817 5 97,672 23.7 Kilowarthour Sales (%!hons of Kilowatthours) Cover: Residential 4,376 4.463 (2 0) i Thefour environments in which the $g'"',",','; ' g$ g& N s 1 Company works today: afamily enjoying the Other 399 416 (3.8) natural environment, construction of a power Sub total 17.233 17.090 0.8 S '" '* U"h'i" 275 ' '0'0 (74 3) ( plant requires the raising of capitalin the Total 17,508 18.160 (3.6) financial environment, a boiler operator in the operating environment and a hearing before The Public Utilities Commission of Ohlo in the rate setting environment. 1

~~ e 4 1 I i The nearly completed transmission yard at the Perry Nuclear Power Plant provides the background for (from left to right) R. M. Ginn, H. L. Williams and R. A. Miller. i l f tion,to improve the productivity o American industry by encouraging adversity that has plagued ourindustry during capitalformation and to break th

Dear Share Owner:

regulatorylog Jam on energy, One of our predecessorsin theleadership of The Illuminating years,we believe fundamental including nuclear pow l improvementis under way. Company, a man of Swedish In many ways 1981 was a i take time. So far, the steps taken ancestry, frequently spurred us on d watershed year for theindustry anour Com Washington,in Columbus and by with the challenge,"The NorthWind made the Vikings great"T our industry and our Company a and Congress went to Washingtonwith a p positive.The results which ar phraseis perhaps more appropriate today than ever before.We believe that the management of the Com-pany todayis responding to ElmerLindseth's cha!!enge. In 2 l f

~. cussed in detailin this report are to finance our construction program, planning costs for four CAPCO j indicative of an improving trend. rate increases which were perceived generating unit projects which were ' While we experienced peaks to be insufficient by the rating terminated in 1980. The Court and valleys, on balance,1981 was agencies and an adverse Ohio reached this decision despite con- , { an upbeat year for the Company's Supreme Court decision. curring with the PUCO finding that customers, employees and share The Federal administration anc* the companies' decisions to construct owners. Congress took two actions to help the plants in the first instance, and i Eamings per common share utilities and our Company raise later to terminate, were both prudent j increased 11.5% from $2.26 to capitalless expensively. They will decisions. The Court decision, which $2.52. both improve our share owner is inconsistent with those in other The improved aamings enabled position and hold down rates for jurisdictions including the Federal t the Board of Directors to increase customers. The first provides for Energy Regulatory Commission, dividends for the 24th straight year tax reductions to encourage invest-was appealed to the U.S. Supreme and to add one more to what is ment in new plant and equipment. Court which so far has declined to now 81 consecutive years of cash These reductions can now be review it on procedural grounds. dividend payments. utilized by utility companies with We continue to pursue correction of Gross revenues exceeded one low taxabte incomes '.ie second what we consider bad law through billion dollars for the Srst sme, an is a benefit to utility snare owners regulatory and judicial actions. event more attributable to the severe who reinvest their dividends in new In October 1981, a Federal inflation that plagued the economy common stock. The Company took court jury found for the Company than results of operations. We would advantage of the first action, and in the six-year antitrust case with the gladly have had lower revenues many of our share owners are taking City of Cleveland, after two days of 4 and less inflation. advantage of the second. deliberation. The City has appealed he Public Utilities Commission The first Perry unit passed the the case. When the appeal is con-1 of Ohio took an essential step 80% completion mark and con-cluded, and we do not believe the toward meeting the need for tinues on schedule, and on budget, appeal will succeed, an era of dis-revenues that cover our costs, toward its 1984 completion date. stressed relations with the City of including eamings to compensate Our integrated organization of Cleveland will end. It is particularly common share owners for their Company engineers, consultants important during these adverse Ct investmer;t, by approving a rate and outside contractors appears to economic times that the Company increase of $147.8 million in 1981. be producing an outstanding result. and the City direct their energies An Order deciding our pending As for the balance of our con-toward a more cooperative and $130 million rate increase applica-struction program, our engineering constructive relationship. tion is expected soon. Since we have and operating organizations have The three of us, the rest of our not caught up with cost increases, reviewed every proposed capital management team and our 5,000 we continue to need regular increases expenditure. Their objective, which employees look to 1982 and the in our prices-a situation that will be was met, was to limit new projects future with great enthusiasm. Dat common to all businesses, including to those absolutely essential to North Wind is still blowing but we utilities, until inflation is licked. provide adequate service and to believe the improvement in camings Those who expected the new complete those projects now under in 1981 was indicative of a lot of Administration's program to bring a way most expeditiously and eco-good things about your Company, strong economic recovery in 1981 nomically. As a result, our five-year now and in the future. We have f were disappointed. Realistically, an cash budget for construction has provided reliable electric service to a immediate tumaround was too much been held to no increase, despite great section of a great cour.try for j to expect. However, our industrial the obvious five-year inflation in over 100 years. We will continue i sales, despite heavy reliance on cost which is a consequence of to do so. b ##'*I ' V l autos and steel, increased by 2.7% dropping 1981 expenditures and i over the 1980 total, notwithstanding adding those planned for 1986. the fourth quarter downtum. Share owners and customers benefit

g Residential and commercial sales from this effective cost control.

Robert M. Ginn. President were adversely impacted by very Two major court decisions poor housing growth and unusually impacted the Company during 1981: // ' / mild weather in 1981. one unfavorable; the other favorable. N l We raised about $275 million The Ohio Supreme Court Richard A. MWer. Executive Vice President from outside financing despite a overruled the PUCO and disa!! owed Ci downrating of our bonds. The rating the recovery through rates of the change reflects our need to continue Harold L. Williarns, Executive Vice President 1 to sell significant amounts of bonds t February 23,1982 i 3 3

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, - )ll M er... q[:?. spective! p. .h ~, ) _l Until the Seventies, electncny w cg and inexpensive. Since 1881' Thtaken for, granted: It was ple m. as . Then came the Seventies. and u ) Steveland Electncelliuminating America in general and the '? e'- Company had w back on household budgets or atdity industry in particular wer electric 1 spread the convenience of elorked hard to never to be the same again poning theturchase post [ e. z service from a small area What happened 8 such as a home or a newof costly items, M ectnc land to the 1 For one thing. the basic. because we are a pubhc ut area we serve. 700-square in Cleve-car But i . economics of4e utiley indu mile A we made a significant contnbuttoday in so doing.' aces charged with meeting the en growth and improving technolowere tumed ups stry to the development of No th g 650,000 residential custome / ion - pi Ohio's industnal base and help d - had worked to reduce thecost r eastem cu es. gy electricity. As recently as 1%5 ' 80.000 commercial cystgiper ereate the jobs that made Gre t of t - e rs. Gleveland one of the most d actually reduced our rates by $3 more than 7.000 industrial firms a er s and . we ' ~ Prepanng for the future energ ? productive areas in the nation.milhon With the Seventies carri ' ynamic'. vidual h4s by allowmg uElectncitythanged our indi rampant inflation, towenng i tmeans we have to install fa y e new generating capacity has brates and nsinstis n erest.'

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and televis added at a higher cost per k'ilow atty pone meeting that obhgation. ~ and dryers.Ms. clothes washersradiosi t enough een" than the average cost pe k l q ster 90s. shavers and air cbnditionidishwaders, hair dryers' ost ~ of existing capacity. r i owatti Through those first 90 year Amencans were sa411ed with'hiAroughout th$ S 'y four environments:The Company i ng. y prodress, we enjoyed a pirit of tru t s of '. 4 andp5 a in' ;; p' a d the)lnership with our customers taxation. In addition Amcosts of hving and growmg lev s ?n s general public. ~ Y s T business, and utihties in partic5t f r we must deal with the effectnmen erican witnessed surging government l' 7 ' \\ ~ working conditions.our operations o s of ar. regulation a 1 ' - I-ND'... ~ n cost of borrowing have hurt Th yTaxes inflation and ~ our, relationship wth the finanvolving - Cleveland Ele 2tnc illuminating C ^ e c mmunity and o~ thers with pany as well as the consumer nciali om special dilemma /individualsWe. however, are faced n a .? '"*"9"" '? ~ ^ try to deal with rr3 lation b f might M V 8 .. ~.. 4' y pann/iD .+ x, [g^. ~ f ;,p.~R. I + LYj y w.. L. - f-

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- ~ - atural Complemhv The natural environment-the air Workingin the natural environment we breathe and the water we use for has become very complex. It requires drinking and recreation-has been a the interplay of many different concem of the Company from the timeacademic disciplines, from engineering we became large enough to affectit. to chemistry to botany. It is legally and.

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As our service area grew rapidly duringoperationally complicated by new and e early 1900s, and as we built new changing regulations and policies . k' ~. th al-buming generating plants to meet emanating from Congress and various at growth, we recognized as we dogovemmental c.gencies. To the com-co e thday that we had a responsibility to plexities add uncertainty-uncertainty ^ 1 e that air and water quality was aoout future regulations and how they to will affect us-and the natural environ-se preserved. ment clearly becomes a most difficult Tschoolosv one in which to operate. As early as the 1920s, pollution For example, the air quality con-control equipment was available in trols and methods we use are designed America. In 1926, we were the first to reduce two types of emissions from s utility in Ohio to install precipitators atour coal-buming plants-sulfur dioxide our power stations. Similarly, we also and particulate matter (fly ash). Both monitored our waste water and treated of these pollutants come from the coal it with the technology of the times. we bum-about six million tons per Our dedication over the years to year-much of it from Ohio mines. 1 I' clean air and water has not come Ohio coalhas a high sulfur cheaply. Progress in pollution control content.Therefore, most of what we J carries a stiff price, one bome by thebumis washed to reduce its sulfur 1 Company,its customers and investors. content prior to buming. Still, Ohio . ~ g coal's sulfur content remains high ljj In the past 10 years alone,we have spent more than $400 million to install enough to make it necessary for the water and air pollution control equip-Company to purchase some expensive ment in order to comply with State low sulfur coalfrom other eastem and Federalregulations. (See chart states.By buming these :wo kinds of on this page.) coalin a balanced manner,we are able to keep sulfur dioxide emissions within the allowable limits. Jim Pitts, Maintenance Supervisor at the Avon Lake Power Plant, and his famt!y enjoy the beauty of Greater Cleveland's unique Metropark system, a part of Northeast Ohio's natural f~ environment which the Company is committed to preserve. 7 i

C To control fly ash emissions, we Even solutons bring new problems. l Install electrostatic precipitators which At our three Mansfield units where are effective in limiting fly ash emssions scrubbers remove substantially all of from our stacks. These devices can the sulfur dioxide from the stack emis-collect anywhere from 95 to 99.6 per 4 ions, approximately 2.75 million tons j cent of fly ash, dependmg on the of useless sludge must be disposed of charactenstics of the coal. Ironically, every year. Another problem is the precipitators controlling fly ash emis-approximately 950,000 tons of fly ash I sions do not work as efficiently with which must be removed from our I low-sulfur coal as they do with high-plants and trucked to controlled land sulfur coal. fill operations each year. l l ~ r ~ 4-1 ' h- , f;jf % l. f s :> * ; y. 2 a w, . h}&Q, VfK n f. g.y? g5 3 ew. ,+ a 4 N ^ r 1 4' h The clean air and water V>- -H viewedfrom a helicopter g ../** over the Eastlake Power a K,- [' l. ph m. Plant is Indicative ofour -9 ~ 4) y 10 year, $400 million, \\ system wideinvestmentin l g r pollution control equipment. k s i 4 s s e s 4 m i 1 8 . i 2 T ~ ~ : r r - ~ ~ ~~ - --'-- r - - ~ - :o-1

During 1981, we completed a be extremely costly to our customers seven year precipitator upgrading without solving the problem. Congress program at a cost of about $200 million should fully investigate the sources to put in place 12 new, state-of-the-art of acid rain and consider the cost to precipitators at three of our plants. the consumer before enacting any legislation. bounts ~ ~ Since 1975, total sulfur dioxide emis-sions from our plants have been h reduced by 33 per cent, while fly ash i emissions from our stacks have been reduced by 75 per cent. g Our policy is to comply with all The Ashtabula Power Plant, s State and Federal air and water quality e9UIPPed with new, state-i regulations. We have complied in ways that minimize the cost to our customers 4 f-the-art precipitators, Perates in harmony with and investors. We are working with t the environment-including the various govemmental agencies to a neighboring playground. see that sound cost / benefit economics are considered before greater financial 'i burdens are imposed on our customers and ourselves. ( N a.... wg... A new environmentalissue has been raised by states to the east of Ohio and b'"*" nite.at by the Canadian govemment: the acid rain phenomenon. Much has been Our stewardship of the natural environ-written and said about acid rain with ment in which we operate has been an little basis in fact. The present need ongoing commitment and responsibility. is thorough research and scientific We are mindful that the present regula-evaluation to determine its causes and tory climate could change drastically. formulate solutions based on prudent We have seen such changes before cost /benefigudgments. The electric and know the stiff price that has been utility industry is sponsoring research paid for improvements in air and water in this field through the Electric Power quality. Nevertheless, we will continue Research Institute (EPRI), an industry-to cooperate with State and Federal i funded research and development authorities as we work to improve our organization. EPRI, the Environmental natural environment. Protection Agency, universities and a host of others are spending millions of dollars in a search for the answers to l the acid rain puzzle. Our concem is that mounting pressures to "do something now" will result in bad legislation, hastily drawn regulations and standards that could 9 ~~ --- a- .-e

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- G The financial environment in which inancial v we operate has been turbulent in recentThe largest items in the budget are '~ years. Rgh inflation and intaest ratesour shares of three nuclear generating i s.1 business. Adequatelycompenscontinue to increase the cost d doing units-Perry Units 1 and 2 and BeaverWHO ARE THE BOND RATERS Valley Unit 2. Also included in the The foundation fo our investors, meeths Sur serv;ating budget are pollution control equipment g*'"y,'[,j,'r the rating

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e and transmission and distribution saidin the tasos by Henry Vamum are more difficult than before.

facilities. Poor, a lawyer and magazine editor. Our objective is to a: range P 'beHe tha fmancing at the lowest possible cost, btians vestors m,, ,n tled, financist esta-information i while maintaining a balaxed capitalThe cost of money for such con-that previcasly had not been made n, I structure and criving to ::nprove our struction depends,in part on ratingsgubn gsp t the ith - i.ecurities ratings. financiassigned to Company secu,rities by ,ought a long battle which even- \\ notraction Budgat Poor. al rating agencies. Standard & tusily ied to sagisration requiring s Corporation and Moody,c corporate financial repo' ting on a i Regulatory lag, high interest rates and Investors Service-two of the majorstandad statistics cornpanyre{ a tight noney market hinder us fromrating agencies-lowered the Com. merged with Foor's Pub:Ishing to i 1 keeping pace with inflation and make pany's first mortgage bond ratings form standard a Poor's Corporation the raising of funds for new construc-from "AA " and "Aa,respectively, to ,,,"rtNbYE$n"Ie$sfiN, tion more challenging. We plan to "A" Standard & Poor's also reduced provides another source oy business spend about $1.8 billion on construc-our preferred stock r

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, f( ,m m. ~ [ y l i i L, The 580 ton eteeldome is , placed on thefrst of two \\ reactorcontainment buildings at the Perm \\NuclearPowerPlant. The two Perry units are major Ctems In the Company's. Q1.8 billion, flue-year ictutruction program. 1 11 ~n

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fte m. ,s w.. w _ NN '.I I 'INM l 1D [iiiMiktimw!ME'$2..d ~ " ' * - _ un QD. 4531a w l n j- - v w-gwm on a4.% ..m; r _s u.,- k.s..:.. 3 \\ \\ (7: p. ";.e ;)3 g Jl The Company must com- .k ', i,' pete successfully in the financial markets because };i of our continuing need to raise neto capital. This i =? t 9 s requires adequate earnings. (; r ( g g ; -]. 4* g 4 g t \\ i A._ In making their decisions, the more vigorous in seeking rate increases. l-agencies cited the Company's low ratio We have adjusted our capitalization of income to interest charges and the goals for greater conservatism. At year low level of intemal cash generation. end 1981, our capitalization structure A contributing factor was last year's was 37 per cent common equity,48 Ohio Supreme Court decision not to per cent debt and 15 per cent preferred allow the Company to recover in rates stock. Our long-term goal is a capital-as an operating expense the costs of ization structure of 40 to 42 per cent four terminated nuclear projects. (See common equity,10 to 12 per cent Note F in "h stes to Consolidated preferred stock and a maximum of 48 Financial Statements") per cent debt. We are striving to restore our Fi...ei. securities ratings to their former levels. In order to do this, we have become Financing activity in 1981 totaled about $275 million. Our major efforts included two private placements of k 12

C preferred stock totaling $70.5 million, the raising of $60 million through stock share owners are participating in private placements of first mortgage the Plan. We expect participation to INFLATION HURTS US, TOO bonds and a public offering of 3V2 continue to grow throughout the year. The prica we pay for essentini millir'n common shares which raised material and equ!pment have been $48.8 million. In addition, we raised d*'a8 Sh' 88*a9 *h "Ythias eine in these years of high int:stion. $22.2 million from the proceeds of in an average yur weinstan some the sale of variable rate, tax-exempt a,ecoinght "3" 'poies and about 27s pollution control revenue bonds. Also, d* **ble. our nut of we increased our term bank loans by Y m N ga N g'es "n*e'"" $50 million. a yeat Late in 1981. we were one of the W fono*3a8 tab!e shows how few utilities which arranged sales of inflation has affected the costs of one knowatthour of electricity investment tax credits and accelerated and items we use: cost recovery depreciation rights as b j provided for n De Economic Recovery fn*c'rNs ' i 1971 test Tax Act of 1981. We raised $25.4 ikwh 2.s4 7.12e tro million in two such transactions. une truck sas,1so s98.000 ts2 in January 1982, we sold four cabietit. s .ss s 1.90 188 million shares of common stock to the Pole s 153 s 56o 2so public which raised $60.8 million. We costiton s es 4s 411 also plan to raise $75 to $125 million ourget. s .24 s 1.32 450 ( through the public sale of first mortgage g d**d As individuals and companies, bonds in the first half of 1982 and The Board of Directors raised the ntration is the crues st tax we pay. i another $200 million through additional quarterly dividend on common stock debt and equity financings later in the from 52 cents per share to 54 cents year. We will continue to raise funds per share on January 5,1982. It was through the sale of common stock the 24th consecutive year in which under the Company's employee stock dividends have been increased and purchase plans and our Share Owner the 81st year of uninterrupted cash Dividend Reinvestment and Stock payments. Purchase Plan. We plan to reduce the average level of short-term debt to give us more financing flexibility. [ /e* t m "1 The new tax law provides an _@f 6 incentive to reinvest dividends in new 4: ~ ".

• s i p4 issue utility common stock through a 1-

.l... Vi let Borden, a Company 4 dividend reinvestment plan so as to m 1 'N - ?.i share owner, greets the K]. encourage capital formation. Th2 Postman as he delivers her income tax on dividends reinvested in ,a O, J quarterly review and divi-our common stock is postponed and P dividends are taxed at capital gain rates ) )$ s dend check. A great number ofour 110,000 if the stock is held at least one year. share owners depend on 4 As a result, participation in the e ; y dividends to meet their Company's Dividend Reinvestment .. c.? F Ilving expenses. Approx-Plan surged about 22 per cent from l$i ?' ^ ^ im tely 78% ofourshare A s,v q. ;.1f J i.E p % i November 1981 to mid-February 1982. h owners own less than Currently,21 per cent of our common p! 400 shares. t L ; .; f,, ity.w4 E t, y. pes. o g I n ..c., ..... n.. +..n ,m,

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1 C Operating an electric utility over the perating task. The Company has prevailed inpast 10 years has been a dem Ourindustrialsales are depressed during the current recession, but most tts purpose-to provide continuous the second half of 1982. The currenteconomist THE ENERGY MAKERS electric service to all of its customers COMMUNICATE at the lowest possible price, consistent level of new construction and urban Our employas,the Energy Makars, with reliability and safety. Elsewhererenewalin downtown Clevelas.d is,"l"g,jly*gayhll der. in this repart we discuss the majorgood evidence that there is a resurging standing amon,g the compa inLences cn,our operat;ons by focusing vitality here at the hub of our service its castoreers climate and natural environmentalon the financial arena, the regulat i Pug *g,,and the generai area. Over the longer term, we are is to counsel ourledustrial, corn-,,n,,,y i concerns. The operating envionmentplanning for sltshtly more than a two marciala l3 'lglndres;dentistcustomers in which we work is affected by what per cent annual sales and Icad giowth. ",'JY,"*"lQ is happening in each of the others.Our construction prcgram is designed 19as, so ne 104,000 customers in m to phase in new generating capacity at sit thrai categories were reached 'h'*" specific intervals during the Eighties g*" P"PM",T,8*Pj'g',yn,, i Our construction program is the most to match this energ visible and costly part of our operating adequate reserves. y demand with 300 genentstio We are committed 18,000 persons,ns to more inan environment. Its progress is directly advising them fuel sources through the rest of thisto coal and

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about the erricient use of home tied to our ability to raise the funds to P pay forit. In addition,the Nuclear .et. century. Regulatory Commission will have a insulation attracted thousands of on electric heating and proper decisive influence on when the nuclear people fr m the construction units under construction are completed '"#"')Iy.peciarises ai En and when they may be operated. The customers attending trade shows, so met with Federal EPA's actions regarding emission limitations will determine the hej$ "us'eN$'f e e,tressing s ns s e future availability of our coal-buming our speakers sureau. staffed with 51 volunteer plants. The Ohio Power Siting Board ',,P,,y',,g,' employees,y l,'," will determine the route of future trans-ti tunitin ~ giving tatks, showing plants, significantly affecting their costs. mission lines and the sites o ii!- - ims and slides and telling our i[ 'Y ' '"' 50 000 **a$ la "' t P "$*y*in enddayo t u ourcustomer service employees work with indi. { viduals, answering questions and helping with problems. During 1981,approximately 740,000 phone calls were handled. Beyond theirjob responsibilities, f our employees invest freely of their / own time in their communities. Many of our employees serve in

• various positions in local govem-ments and many more work as p

volunteers in other activities ranging from Little League to Little Theater. J!m Pappas (left), Boller Operator at the Eastlake Pzwer Plant, symbolizes o the operating environment. ~ 1 1981 was an outstanding Ed Plomske, supervisor of \\ yearfr:m the standpoint a line multi-crew unit, serves his community of $fgenerating eficiency and BaInbridge as a volunteer ' ervice reliability. s fire chief. ( \\ 1g5 ~ ~ ~ ~~~

_n.__.__ 1 N.es Our eerry construction project is In spite of the unfounded claims of currently on schedu'e and on budget, the anti-nuclear groups regarding We realized at the time we contracted nuclear safety, the fact remains-and for the Perry Plant that we would be it is indisputable-that America has successful only if we became deeply had 500 reactor years cf commercial involved in its construction on a day-nuclear power generation without a to-day basis. Consequently,in the single nuclea'r-caused death or injury. early Seventies, we created a manage-We know of no other large-scale ment organization, which was unique industry with such an enviable re-ord in the industry at that time, to assume of safeguarding the public. Desp:te the overall management responsibility for unfortunate consequences of the the construction of the Piant. Construcdon of major new nree Mae Island (TMI) accident, the Abcut 4,000 penpie are working ofce buildings in down-safety systems worked. No one died at the Perry site-over 400 are Com-town Clevelandis illustratfoe or was even injured. New information pany employees and the remainder of the vitaHty of our service derived from a thorough examination are consulting contractors and their area. Pictured here (left to of TMI has resulted in further refine-craftsmen. We are leaving nothing io right) are the 28-story ments in nuclear technology which chance on this project-our own SUPerfor Square Ofre make all plants-existing ones and employees are in key positions to see Tower, the 31-story Medical those under construction-even safer that all work is done properly, safely Mutual Center and the than before. The likelihood of financially and on time. 16-story Ohio Ben General debilitating shutdowns has also been Ofce Bunding. Dese significantly reduced. P.reor ..e. buddings, scheduledfor C mP edon in M3, wHI ) l We are committed to nuclear The year 1981 was an especially power. We have completed construc-satisfactory operating year. The length Provide more than 1.5 tion of 80 per cent of Perry Unit I while of downtimes on generating units was mHH n squarefect ofnew Perry Unit 2 is 40 per cent complete. considerably shortened from last year's fce space. Beaver Valley Unit 2, now 50 per cent experience. I7, _95.MN VM complete,is being built by Duquesne Our generating units are complex Light Company, a CAPCO partner. machines, susceptible to breakdowns. [MN /iFW (See Page 45 for information about We operate our system with reserve '"D 3 b-CAPCO.) While the construction costs units ready to back up any that fail so [M of nuclear plants are greater than those that the customer is unaware of the of coal-fired units, their long-term outage. The more our better units run, pt c. payoff for consumers comes from the the more efficient our overall operation. ?' /; much lower cost of nuclear fuel. He Moreover, the greater the " availability electricity we get from Davis-Besse is (the percentage of time units are avail-O the lowest cost power in our system. able), the less is the reserve capacity Without Davis-Besse, our customers need in the long run. Overall, avail- { would have been charged more than ability was improved to 74.8 per cent $50 million in additional fuel costs in in 1981 compared with 71.0 per cent t 1981. Compared with fossil fueled in 1980. he only extended equipment units, nuclear generation will result in outages were those planned to take wli lower bills over the long run. place during the installatics of polluticn [ E control equipment. ,(' = Efficiency and availability are 5,9 closely related. In 1981, improved efficiency of our fossil-fueled units k. reduced our fuel expense by $2.4 l million from the 1980 !evel. As nuclear A power becomes a larger part of our generation, we will be less dependent J. ~ l 16

\\ \\ I C on some of our older,less efficient Ro coal-burning plants, further improving Our performance in the 1981 operating our efficiency. environment made it our best year i Reliability is the key measure of ever. Construction progress was on service from the customer's perspective. target. Availability, efficiency and Last year our customers had electric reliability were improved. Costs were 3 service available on the average of kept under tight contre!. We will 99.98 per cent of the time This is continue to reinforce our system, typical of the United Ststes where we improve our services and closelv i have the best rehability in the world. supervisc our construction program. Service interruptions experienced by It is a tribute to those who pre-our customers were reduced from the ceded us and a challenge to us today previous year. Average restoration to note that The Cleveland Electric time for those customers whose service Illuminating Company has provided was interrupted improved from 100 quality electric serwce for more than minutes in 1980 to 67 minutes in 1981 100 years. We promise the same for a 33 per cent improvement. the future. Syste,s Peak On July 9, our customers created a new 60-minute peak demand of 3,362 megawatts, up from 3,304 last year and 12 megawatts higher than the ( previous record set in 1977. This new high was set in a period of weak economic activity; we expect and must plan for higher peaks in the future. e -), ? I r j.'3 f -. - n m. 9 ^ _y. ~ n \\ =- . y, ? s % cu.; - ' @ 3 { 1, y %. K - g 'il1 y, ) - .. a 3, wJ-y i 3 / F':~.Q.. +4 g . v. J v m,, k. = v.4 Y . Ml - w.a. w .a

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ate-setting E R THE PUCO COMMISSIONERS The extraordinary efficiency and At least 90 days prior to a formal filing More than 100 yurs ago,t'w Ohio r:Jiability of the electric utility industry of a new rate case, we must file with the 0,* " *'nu epubbn'IErTe in America didn't just happen. It PUCO a " notice of intent" to file for certain rr.sult:d from the flexibility and adapt-an increase in rates. This is followed servien should be provided by regulated monopolin in iss7,the ability ofinvestor ownership of the by the formal, detailed request for the G***' A*"mbly singled at ram clectric utilities. An essentialingredient ',n*d[ N agency E gN te in this process is govemmental regula-rate increase. Each step in a sirigle rate case-them. It wasn't u9t:11911 that tion. The regulation of rates-the a 12-month process whichincludes 'j,tg8g*lt",*",dg*g,,, price we receive for our product-is notice of intent, formal filing, staff i a decisive factor in our industry. report,public hearings and PUCO reguisuon through the Public Swees Commiulon of Ohio-decision-is widely reportei Rc later renamed The Put.fic Utilities P Rate regulation makes us dif'erent from public often hears, reads and sees Cgm n of most other industries. His regu'.atory several media stories and dces not the PUCO,two Raputgicans and process has evolved at Federal and realize they are alt re!ated to different w Dmocrat,m appointen of On May 4,1981, we were granted G*Jo*n'7'x#*$n")N, time frames. str.te levels from legislation, administra- ,i ,i, n of the PDCO ar.d was appointM in tive practice and Judicial review. a 17 per cent, $144.1 million (later July 1981.Ketty had been the Specifically, the primary rate-setting increased to $147.8 million) electnc rateNtYd'a't A.'sU*b*ry"a$ envirenmentin which the Company increase based on a request submitted had worked closely with the PUCO operates today consists of laws passedin July 1980. On May 5,1981, we in coordinating iogislative piograms by the Ohio General Assembly, the filed an application for a 12 per cent, $'f[,'n"8 *W,, *[o',",~j "*"" administration and application of these $130 million rate increase which will American university, washington, laws by The Public Utilities Commission be settled earlyin 1982. Then in D.C.,and esmed his law degree of Ohio (PUCO) and rulings by the November,we filed a notice of intent 'c'$*,C*"',*$hi[. 7 i ( Ohio Supreme Court and the U.S. for an increase of 17 per cent,or $221 bu Michael o.1 san..ss,(o), a Supreme Court. When our costs in-million, which will set rates for 1983. former state repruentauve from crease and we need a higher price for M*gC$i'A**s**N'He

• d our electricity,we must seek PUCO approval which involves a rate-setting resigned f rom the state legislature, where he was chairman of the process that takes months to complete.

House State Govemment Com. (See story on next page.) mittee,to accept the appointment. 'The amount we ask for is what we oot sane served to years in the Ohio House,from 190 to 1978. believe we need to keep the Company D

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R as financially healthy. This includes a fair ,,,',"ny,d l j,, , Before return to our investors Consistent with his appointment, Pines was legal director of the PUCO where he has the commitment we made to them s. ad when they invested their capital with

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,nd us.We must also provide reliable ceneral Electric before joining the electric service by maintaining and PUCO. A native of New York City, Pines eamed a degree in chemistry expanding our generation, transmission at Case Westem Reserve University aad distribution system. in Cleveland and a law degree from Capitai University. Charles C. Chopp (seated left), Company Controller, is testifying before The ( Public Utilities Commission of Ohio in connection teith a Company rate Increase application. 19

t We believe the public would better understand the need for rate in addition, we have an application increases if our rates, as are prices for a rate increase covering sales for charged by other businesses, were resale to the Cleveland municipal elec-WHAT'S A RATE CASE'? based on current costs. We have asked tric system pending with the Federa] physicany, a rate ca.e is imp,wai,e. the PUCO to consider expenses in-Energy Regulatory Commission. We It stands 18 Inche g,'j 's "s taH,la made up curred in a current, or matching, test began collecting this $2.3 million in-h '* m,2[Et-year (rather than historic) which would crease in September 1981, subject to just ourdirect testimony in the promptly recognize the effects ofin-refund depending upon the outcome formal fHino-flation on our operations. 'thus,1982of formal hearings- ,,y,Fy,,5 7Tjg,*,, rates would then be based on 1982 Ourindustry and its regulatory typicany consumes,about m.cy;

costs, process has hooa the subject ofi n:enhours of Company mff tae.

i While our electricity public dialogtu. 'Qt, under regum,ntense Nu'C$'*iNf tUbh*$ e major revenue source, sales are outhe investor-owned electric utility months examinir g it. Then.the ic., f our steam heating business accounted for moreindustryin this country has become PUCO statt issues a " Staff Report" than $15 million in revenues in 1981. the most efficient and dependable in y*h h m es a pr. ,kludo-a A $7 million rate requut filed in Aprilthe world. To maintain this unique requested rate incruse they think w_ was granted earlyin 1982. We filed a status, our regulatory process must should be granted. written objections to the Staff request for an additional $2.4 million continue to be responsive to changing7,MIt,[i,o wn ch in February 1982. economic conditions. This requires '* Y 'd by prompt and adequate rate increases are addressed k. public hearings. which provide both full recovery of Hearings usually begin about The hearings, presided over current costs and competitive com-pensation to investors. examiner who works for the PUCO, take about four to six weeks. During this.ime, as many as 40 witnes might be heard. The Company, ses y intervonors and the PUCO staff an may present witnesses. Interven mayincludemunicipalgovem ors monts, organizations representing all classes of customers and other specialinterest groups. After the hearings, each party to the case writes a brief and submits it to the hearing examiner.Sub-sequently, the heartng examiner drafts an " Opinion and Order." 4 He submits it to the PUCO com-missioners who make the final Y judgment on the issues and set the amount of the rate increase to be granted. l QQ~ n ~ %L Barbara Luethjohn, ' N, Treasury Department, -~ stands beside the stack of m direct Company testimony requiredforformalfiling of a rate case. I \\ 20

y A x4 ys'. 4-* T. l l p 7. m ,f 3 x L Management's disc $ssion and analysis J 'of financial condition and results of operations 4 k C.pu.i n. =re

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• these increased costs (" regulatory lag"). Consequently, Te are carrying on a construction program under.

eamings per share have improved slightly since 1979 I which new facilities are being built to meet the antici-although the ratio of eamings to fixed charges declined pated growth in demand for electricity in our service (2.67,2.33 and 2.37 in 1979,1980 and 1981, 9 area. We also are building facilities needed to comply respectiveh). h with pollution control regulations. During the years - ([ 1979-1981, we spent approximately $1.2 bill:en on I,[jfg'v5shI 1nE our construction prognm. This an:ount includes an allowance for funds used dunna construction which

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~' 7 Fhancial Statements". We estimate triat the cost of the about $1.8 billion. The details on the construction pro- ,. M N ~;u% k program for the next five years (1982-1986) will be .U 6S" W ' n g (m.. n 4 v .u u, b gram are descdbed elsewhexc in this Ar nual Report A.h-wa 1.qs { At December 31,1981, our purchase commitments c - ,;. f 4 ' ,.g ,z r E tota!ed $303,522,000 which relate mainly to the n- [ construction program. J i - u Q [ After paying our expenses, taxes, interest and dividends, our business does not currently genera:e >Q- .. i;} - 7 all of the funds needed for our construction program. T i ; :.3 ' - (V: k Accordingly, we must raise additional money from y ;.,4 y investors. In the last three years, about 70% of the ^< i' q D I{ % money used for construction was raised from sales of ?-

1. f '

~..f*. securities, such as notes, first mortgage bonds and 7 i-jp O,o 'L. J^ L preferred and common stock, and from bank borrow-e s ;.. h ings. The cost of these funds has been high and the '8j K 7 Ys f' common stock was sold at prices below book value. j-We also raised funds from two sales of the Federal We have attempted to minimize the effect of [ income tax benefits related to equipment placed in regulatory la2 by filing for rate increases as often as L service in 1981. These sales were made possible by allowed by law. In addition, we have asked for rates changes in the tax treatment of equipment leasing to be based on costs expected to prevail during the rules contained in The Economic Recovery Tax Act period when the new rates would be in effect rather of 1981. We expect to raise approximately one-half than on historical costs. Details on rate matters are of 1982-1986 construction program funds by selling discussed elsewhere in this Annual Report. L various securities and by borrowing. In 1981, ratings on our first mortgage bond: were [ In order to be able to attract money from lowered to "A" by both Moody's Investors Service investors on the best terms, we must receive sufficient and Standard & Poor's Corporation. Previously, the 4 and timely rate increases to enable us :o pay them the bonds were rated "Aa" by Moody's and "AA " by b return on investment they demand in the form of Standard & Poor's. Our preferred stock rating was 9 interest, dividends and increased net worth. The Public maintained at "a" by Moody's, but was dropped to t Utilities Commission of Ohio ("PUCO") has granted "BBB" from "A " by Standard & Poor's. le us the following retail electric rate increases in the last We will continue to be vigorous in seeking fair ~ t three years-9.2% (1979),9.0% (1980) and 17% rate levels in order to maintain as strong a financial 1 (1981). We also received various increases in steam, position as possible. Without needed rate increases U wholesale power and street lighting rates in the three-it would be impossible to earn a fair return for year penod. These rate increases and higher allowances our common stock share owners in an inflationary for funds used during construction offset effects of economy. This also could result in further lowering inflation on operating expenses, higher interest expense, of our securities ratings, thereby increasing the cost !( stock sales and the delay between the time our costs of raising money from outside sources. Our rate k' go up and the time we receive a rate increase to cover increase requests and future financing plans are designed to prevent further lowering of our ratings m l tb t c u _aa A- ~ _,;_. a.- w. l

y;.-.au... .. w ->J. t,- E lm while maintaining a balanced capital structure of R...it. or o,.r.tio 4 40-42% common equity,10-12% preferred and The chart below sets forth the factors which caused preference stock and a maximum of 48% debt. At our electric revenues to increase in each of the last year end 1981, our capitalization structure was 37% five years. common equity,15% preferred and preference stock t and 48% debt. Specific financing plans are discussed elsewhere in this Annual Report. Over the 1982-1986 period, we must refinance $398,364,000 of maturing debt and preferred g stock which was outstandirig at December 31,1981. In addition, we are required to offer to redeem s F $19,400,000 of preferred and preference stock in iN 4 both 1984 and 1935 and $36,067,000 in 1986. .m Some of our deb: which matures in the five-year W period has very low interest rates. Refinancing of this 4 b. debt will probably be done at much higher rates, Y,Ie thereby increasing our cost of capital. hH, gg y E L The amount of First Mongsge Bonds the p,f)l ~k M %lm. g$p km 5 Company can issue is govemed by our Mortgage and p@ l. Deed of Trust. At December 31,1981, we had the Q ability to issue approximately $646,000,000 of ad-M E4 ditional first mortgage bonds. This amount fluctuates as M M %, new property is acquired and interest rates and cam- "A IA 3 [ ings change. There are no restrictions on issuing addi-

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/ tional authorized preferred stock and preference stock. " La We use short-term financing, such as bank lines of credit and the sale of commercial paper, to give us flexibility in timing our long-term financings. Money n In the last three years, the most significant factor raised through these means is primarily used to fi-affecting kilowatthour sales was the recession which nance temporarily our construction program. We have began in 1980. Sales to industnal customers were a total short-term borrowing capability of $240,000,000 down 13% in 1980 from 1979. The decline was in the form of bank lines of credit and revolving loan due primarily to lower sales to automobile and steel l } commitments. In accordance with customany industry manufacturers. In 1981, industrial sales recovered practice, part of these lines are held in reserve t strongly in the first nine months. However, a 12% 7 ensure that we will be able to pay off commercial decline in the fourth quarter resulted in industrial paper when it is due. Our commercial paper has the sales increasing only 2.7% in 1981. Economic con-l highest rating given by Moody's. Standard & Poor's ditions as well as milder weather were the major i rates our commercial paper in the second highest factors affecting sales to commercial customers in y category. Note L of " Notes to Consolidated Financial 1981. As a result, commercial sales increased only Statements' gives the details of our credit arrange-0.7% in 1981, down from the 2.7% increases in both ments. The Balance Sheet shows the amount of short-1979 and 1980. Residential sales were down 2.0% term debt which is outstanding. At year end 1981, in 1981 after moder' ate gains in 1979 and 1980. The r we had on deposit with trustees $36,337,000 t decrease was due primarily to milde weather. Our finance pollution control facilities under construction. sales to other utilities showed a significant decrease relative to 1980 because a sales agreement with another utility was not renewed in 1981. Overall, h sales declined 4.6% in 1980 and 3.6% in 1981. 7~ Fuel and purchased power expense is the larg-est part of our operating expenses. The amount of ) purchased power varies from year to year depending ? 6 L ~w - -.x-_ .-.a. u.- a

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' upon the availability of our power plants, the energy . extemal financing and higher interest and preferred y demands of our customers and the price of electncity dividend rates. The impact of the increases in these 'available from other utilities. In 1981, we generated. Items was only partially offset by related increases in b 'more of our energy needs at our plants than in 1980,- the amount of the allowance for funds used during c primarily because of the greater availability of the construction. Davis-Besse Nuclear Power Statka. Accordingly,. The significant increase in deferred fuel expense purchased power expense decreased sharply from is discussed in Note B of " Notes to Consolidated the preceding year. Financial Statements". 2. For a discussion of how we are affected by infla-tion, see " Supplementary Information Conceming the Effects of Inflation". We could be affected in the future by the resolu-tion of legal proceedings regarding recovery of our L investment in generating unit projects which were o terminated in January 1980 as described in Note F of ? " Notes to Consolidated Financial Statements" and T the timing of recovery in rates of the cost of coal obtained from the Quarto Mining Company as de-scribed in Note B of " Notes to Consolidated Financial Statements" The retrial of the antitrust suit brought by the City of Cleveland against the Company was completed in October 1981. The jury unanimously 3-, found in favor of the Company. The City had pre- '( f sented evidence claiming treble damages of about ( $160,000,000. On December 2,1981, the City appealed the decision to the United States Court of Appeals for the Sixth Circuit. The Company believes that the ultimate resolution of these three matters should not have a material adverse effect upon its financial position, Total fuel and purchased power expense although an adverse final determination in any of increased over the 1979-1981 period despite the them could have a material effect on income for the decrease in total kilowatthour sales. This increase period in which it occurs. E occurred because of sharply higher prices of coal and oil. Substantial use of nuclear generation, which has a a low, relatively stable cost of fuel, partially offset the increases in coal and oil costs. Nuclear generation K accounted for 9%,7% and 13% of our total electric' generation in 1979,1980 and 1981, respectively. ( Other significant items affecting earnings per share were increased payments of interest and pre-I ferred stock dividends and a greater number of out- [ standing common shares resulting from additional E U; d- ) P5.y e ..e i / ( + n vri. .._www : - .s ~ 2. - A. ....ma 'w

m, ( . ) d '4 j V 1-} I f T t J y' b Management's statement of responsibility for financial statements The management of 'Ihe Cleveland Electric Illuminating Company is responsible for the consolidated financial state-ments which appear in this Annual Report. The statements were prepared in accordance with generally accepted accounting principles which are appropriate in the circumstances. These principles require that certain amounts must h be recorded based on estimates. Such estimates are based on an analysis of the best information available regarding the amount to be estimated. We maintain a system of intemal accounting controls. The control procedures used are designed to assure that our financial records are reasonably complete and accurate. They also are designed to help protect the assets and t their rehted records. We make an effort to ensure that the costs of our control procedures do not exceed the benefits. We have an intemal audit program which monitors the intemal accounting controls. This prognm is designed

i.,

to examine whether the controb are adequate and effective. Also, an examination of the hnancial statcments is ( conducted by Price Waterhouse, independent accountants, whose opinion appears below. The Board cf Directors of the Company is responsib;e for determining whether management and the independent i accountants are carrying out their responsibilities. The Board has established an Audit Comm;ttee comprised entirely of outside directors. The responsibilities of the Audit Committee are described elsewhere in this Anr.ual Report. k i [. Report ofindependent accountants ) U 1900 CENTRAL N ATIONAL BANK BUILDING (( - r CLEVELAND, OH 44114 { 4j[aterhouse -m K To the Board of Directors and the Share Owners of i The Cleveland Electric Illuminating Company: f We have examined the consolidated balance sheet and the consolidated statement of capitalization of The ( Cleveland Electric Illuminating Company and its subsidiaries as of December 31,1981 and 1980, and the related consolidated statements of income, retained eamings, and changes in fumncial position for each of the three years in + the period ended December 31,1981. Our examinations were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. 4'. As more fully described in Note C to the financial statements, the method of copiputing depreciation for the Davis-Besse Nuclear Power Station was changed in 1979. In our opinion, the consolidated financial statements examined by m present fairly the financial position of The Cleveland Electric Illuminating Company and its subsidiaries at Demnber 31,1981 and 1980, and the results of I[ their operations and the changes in their financial position for each of the three years in the period ended December 31,1981,in conformity with generally accepted accounting principles consistently applied during the period except for the change in the method of computing depreciation for the Davis-Besse Nuclear Power Station, with which we concur, referred to in the preceding paragraph. -) I' February 12,1982 Price Waterhouse l D l m 4 x_j C = .- uma m 4

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( iN[. 1981 1980 1979 -[ f "d' " "I OPERAllNG REVENUES ' 'a [) Electric ~ ^ $1,000,734 $878,501 $811,219 Steam - 12,1 % 15.065 13.048 7' Total Operating Revenues 1,012,930 853,566 824,267 OPERATING EXPENSES ~ ^ I ' Operation, ^~ Fuel 332,837 268,096 272,599 Deferred fuel (10,683) 959 959 r Purchased power 29,256 91,292 75,469 [ Other 149,374 127.823 108.873 ) k Maintenance 500,784 488,170 457,900 2 74,925 67,058 53,763 L Depreciation and amortization 85,294 64,619 59.443 p, Taxes, other than Federalinccme tax 91,648 S1,630 79,455 i Federalincome tax 67,575 41,574 38.227 [.; Total Operating Expenses 820,226 743.051 688.788 4 NET OPERATING INCOME 192,704 150,515 135,479 NONCPERATING INCOME [i Allowance for equity funds used during construction 48,970 40,873 33,432 i Other income and deductions, net 10,617 7,605 4 889 Federalincome tax-credit 16.125 13,932 9.300 Total Nonoperating income 75.712 62.440 47,621 INCOME BEFOREINTEREST CHARGES 268,416 212,955 183,100 INTEREST CHARGES Long-term debt 121,040 95,085 79,534 Short-term bank loans, commercial paper and other 25,672 17,538 5,765 Allowance for borrowed funds used during construction (34,030) (25.051) (15,733) } Totallnterest Charges 112,682 87,572 69.566 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 155,734 125,383 113.534 Cumulative effect of change in depreciation method on periods prior to January 1,1979 4.125 b NETINCOME 155,734 125,383 117,659 Dividend requirements on preferred and preference stock 34,917 27,711 25.587 EARNINGS AVAILABLE FOR COMMON STOCK $ 120,817 $ 97,672 $ 92.072 EARNINGS PER COMMON SHARE Before cumulative effect of accounting change 2.52 2.26 2.31 Cumulative effect of change in depreciation method on n periods prior to January 1,1979 .11 Total 5 2.52 2.26 2.42 DIVIDENDS DECLARED PER COMMON SHARE 2.08 2.00 1.92 Retained earnings statement For the Year Ended December 31, 1981 1980 1979 c' (Thousands of Dollars) BALANCE AT BEGINNING OF YEAR $ 258,432 $245,716 $225,950 ADDITIONS Net income 155,734 125,383 117,659 DEDUCTIONS g Dividends declared Preferred stock 29,762 22,949 21.010 E Preference stock 4,417 4,417 4.417 L' Common stock 99,134 85,2 % 71,842 Costs of issuing equity securities 568 5 624 Total Deductions 133,881 112,667 97.893 a, -f BALANCE AT END OF YEAR $ 280,285 $258.432 $245.716 The accompanying notes are on integralpart of these Anonemistatements. r f.' s 25 t : '._] a J. -d.._. 2 '$ _J 2 Ii " A - mM%,,#)L4 mat = 4.. wei,wk.sumenem6eagee,wdA+44mmenen,4 e i s s_w

6, .t , j, a.x. x. y n. R,' 4 ~y [ - \\. i f a ',W, '. a. n i,; ~ L 'y' : .2 g.: jf ,.c alance sheet at December 31 % cieveland Ele Illuminating Company and Subsidiaries j Sets 1981 1980 " ^ ' (Thousands of Donan) - K PROPERTY AND PLANT Utility plant ~, Electric in service $2,585,892 $2,372,851 g,f Steam in service 38.546 31,404 b 2,624,438 2,404,255 6 Less accumulated depreciation and amortization ' 621.353 557,854 l !:' 2,003.085 1,846,3 % 'O Construction work in progress 986.457 811.084 2.939,542 2,657,480 Other property,less secumulated deprec'ation 23,870 21.137 3,013,412 2,678,617 g, POLLUT10N CONTROL CONSTRUCTION FUNDS-unexpended 36,337 71,943 CURRENT ASSETS 5 Cash 6,946 9,124 p Temporary investments, at cost 17,750 Amounts due from customers and others, net 94,407 104,883 l Materials and supplies, at average cost 25,640 24,545 Fossil fuel inventory, at average cost 68,773 67,467 Taxes applicable to succeeding years 63,610 58,111 Other 1,786 1,481 r' 278,912 265,611 DEFERRED CPARGES _1 L Unamortized costs of terminated projects 49,598 54,244 .) Deferred fuel 11,642 959 Other 16,174 23.088 77,414 78,291 53,406,075 53,094.463 L L apitah.zation and L. bilities ia CAPITALIZATION (See rtatement of Capitalization) b Long term debt $1,328,404 51,211,528 Serial preferred stock Wrth mandatory redemption provisions 271,000 203,500 Without mandatory redemption provisions 95,071 95,071 Serial preference stock with mandatory redemption provisions 57,000 57,000 Common stock equity 1,002,206 912,731 c. 2,753,681 2,479,830 L CURRENT L. ABILITIES C Lurrent portion of long-term debt 20,145 10,148 Notes payable to banks and others 94,% 3 166,937 Accounts payable 105,302 91,081 Accrued payroll and vacatione 13,353 11,466 Federalincome taxes 8,300 4,070 Other taxes 103,631 102,415 Interest 27,491 21,205 Other 5,286 5.235 378,471 41; 557 DEFERRED CREDITS Unamortized investment tax credits 102,438 84,798 Accumulated deferred Federalincome taxes 134,043 107,654 J Unamcrtized tax benefits sold to others 25,101 .h Other 12,341 9,623 COMMITMENTS AND CONTINGENCIES-See Note M 273,923 202,075 l b,, ' 26 53,406,075 $3,094,462 ihe accompmene noses are an 6ntegralpart "!these financialsuomenu. bi m,g;M. 'M m m; ..m 1

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+ y a. u. f.,. ;.,. .?i e .m s s. 1) apitalization at December 31 he cleveland Electric Illuminating Company and Subsidiaries ~ 1981 1980 1981 1980 d LONG-TERM DEBT (a). ' (Thousands of DoDars) (Per Cent of Capit. w non) First Mortgage Bonds-maturing through 2013 / 4 at rates of 2%% to 15%% (Less $20,000,000. ; 3 In 1981 classified as current) $1,092,291 $1,030.091 y, Collateral Pledge Notes-maturing in 2010 at semiannual - equivalent rates of 11.75% to 15.17% 23,900 19,100 + Term Bank Loans (b)-maturing 1984-1988 =tt 100%. ?. to 105% of prime rate 134,00C; ' 84,000 t Promissory Notes-maturirig in 1983 et a rate of 14% W (Less $10,000,000 in 1980 at a rate of 15%% 9 classfied as et.ner,t} _ 29,000 20,000 a Pollutien Control Notes-maturing through 2012 at rates of 5.6% to 6.7% (Less $105,000 in 1981 and 1980 classified as current) 57,945 58,050 Other - net

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26,8,,, 28? Total Long-term Debt 1,328,404 1,211,528 48.2 48 9 SERIAL PRErFRRED AND PREFERENCE STOCK-cumulati,re, without par vaiue,4,000,000 and 3,000,000 ~ authorized shares, respectively Preferrtd Stock without mandatory redemption provisions Annual Dividend Series Rate Shares A $7.40 500,000 50,000 50,000 [f a B $7.56 450,000 45,071 45.071 Preferred Stock with mandatory redemption provisions 95,071 95,071 Annual Mandatory Dividend Redemption Series Rate Shares Price C $ 7.35 250,000 $ 100 25,000 25,000 E $ 88.00 57,000 $1,000 57,000 60,000 F $ 75.00 50,000 $1,000 50,000 50,000 G $ 80.00 40,000 $1,000 40,000 40,000 h H $145.00 28,500 $1,000 28,500 28,500 L 1 5145.00 31,500 $1,000 31,500 J $113.50 29,000 $1,000 29,000 K $113.50 10,000 $1,000 10,000 271,000 203,500 t Preference Stock with mandatory redemption provisions [~. Annual Mandatory Dividend Redemption Series Rate Shares Price 1 $77,50 57,000 $1,000 57,000 57,000 L Total Prefer ed and Preference Stock 423,071 ,355,571 15.4 14.3 [$ COMMON STOCK EQUITY p Common shares, without par value -85,000,000 authorized; b 51,054,503 and 46,288,629 outstanding in 1981 and / 1980, respectively 721,921 654,299 b Retained eamings 280,285 258,432 [D Total Common Stock Equity 1,002,2 % 912,731 36.4 36.8 TOTAL CAPITALIZAllON $2,753,681 $2.479,830 100.0 100.0 V (a) long-term debt matures during the next fwe years as foDows: $20,105.000 in 1982 (classifed as a current habihty on the conmbdated Balance Sheet); . $144,805,000 in 1983; $82.210,000 in 1984; $70,501.000 in 1985 and $57,210,000 in 1986. ~ (b) The repayment provisions of the Company's term loans outstanding on December 31,1980 were amended in E81. The effect of the amendment was f to spread over the years 1984-1988 the repayment of the $84,000,000 due un'er these loans. OveraD interest rates under these loans also were reduced. The accompanying noces are on integraf part of these financiaf statements. p Va .~i. a e- ~ e. Lx w.- u.Y + wxmwG_ wm ma_m.,

L., m b i 4 b bhanges in financial position The Cleveland Electric IHuminating Company and Subsidiaries [ For the Year Ended December 31, 1981 1980 1979 FINANCIAL RESOURCES PROVIDED Income before cumulative effect of accounting change $155,734 $125,383 5113,534 Items not affecting working capital Depreciation and amortization 85,325 64,640 59,459 1' Deferred Federalincome tax 43,931 30,330 21,445 i. Allowance for equity funds used during construction (48,970) (40,873) (33,432) Other 1,910 1.636 1.245 f: Total financial resou ces provided from operations 237,930 181,116 162.251 Cumulative effect of accounting change 4,125 o Sales of securities b First mortgage bonds 82.200 171,591 52,000 t Preferred stock 70,500 28,500 Common s'ock 67,622 79.604 91,762 b Total sa!es of securities 220,322 279,695 143,762 I Term bank loans 50,000 60,000 Promissory notes 30,000 Collateral pledge notes 4,800 19,100 Sale of tax benefits to others 25,199 Pollution control funds expended 57,805 95,255 72,405 Increase in short-term debt and other bc,rrowings 80,431 63,327 Working capnal decrease (a) 14,591 6,077 u E Other 1,451 L Total Fina..eial Resources Provided $612,098 5685,597 5511.947 -) t FINANCIAL RESOURCES USED 7 Addaions to utility plant 5409,277 $398,088 $3S5,892 [ Allowance for equity funds used during construction (48,970) (40,873) (33.432) / 360,307 357,215 352,460 Retirement of first mortgage bonds 31,831 p Retirement of preferred stock 3,000 Retirement of promissory note 10,000 t Dividends 133,312 112,662 97,269 Pollution control construction funds deposited 22,200 123,300 52,000 L Deferred fuel costs 11,642 P Decrease in short term +bt and other borrowings 71,637 [. Working capital increase,a) 51,715 Other 8.874 10,218 I Total Financial Resources Used $612.098 5685,597 5511.947

SUMMARY

OF CHANGES IN WORKING CAPITAL (a) L Temporary investments 5 17,750 $ (4,300) $ 4.300 L Amounts due from customers and others, net (10,477) 26,572 9,784 c Fossil fuelinventory 1,306 11,912 15,632 108) 0,634 (23,215) Accounts payable and accrued payroll and vacations (16,446) F Federal income and other taxes payable (5, 120 (14,408) Other (1,616) 7,777 1.830 L Change in Working Capital (a) 5(14,591) $ 51,715 5 (6.077) (t) Other than short term tnrrowrngs and cunent porton of long-term debt. The accompanysng notes are an entegral pan of these fsnancial statements. t : g. P. ' Eu

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a-X' .*t% .f-l. O otes to Consolidated Financial Statements M N ot. A s arv.e si ui 4 2-= c ie.ei,s ~and FERC allow us to inclu'de a portion of the cost of r U p WEare required to foDow the accounting principles set by money as part of the total cost of constructing new assets. h Pubbc Utihbes Commission of Ohio (PUCO) nd the - Such cost of money is recorded as the ADowance for Funds p g

Federal Energy Regulatory Commission (FERC). A Used During Construction (AFUDC).

descnption of our significant accounting principles follows. The amount of AFUDC for an accounting penod is determined by applying a rate of AFUDC to the accumuhted ' Consolidation construcbon costs. The annual AFUDC percentage rate is Our financial statements include the accounts of two mina- ' determined by a formula set by FERC. h rate represen's subsidiaries.We own aD of the stock of both. One subsidiary an average of the cost of money we are uring for con-is The CEICO Company which owns nonuti'2y land and structen costs. The rate is compounded semiannuaDy. The b provides certain submetering services. N other is CCO part of the rate which represents interest is seduced to {' Cornpany which coordinates the operation of a five com. recognize that interest is tax dedxtible. pany power pool (which includes the Company) ca!!cd the & amount of AFUDC appears on our income state-Cential Area Power Coo-dination Group (CAPCO).The ment in two places: under Nonoperating Income as the + costs of CCO are shared by au the CAPCO companies. "AE wance for Ecu2ty Funds Used Dunng Constrxbon" J and under Interes* Charges as "ADowance for Borrowed h Property arvi Plant Funds Used Dunng Constructx>n" On the bahr e sheet, the The electric property we o un is stated in the financial AFUDC becomes part of " Construction Woik in Progress" statements at the cost incuned when f:rst devoted to public When construcbon is completed, we stop recording F utility service. Steam property is stated at the price we paid AFUDC. At this point, the total cost of the new asset, for it. h cost of making repairs is deducted from revenues including AFUDC,is used to determine the rate we charge e in the income statement as maintenance. The cost of our customers for service. Since the rates we charge for h replacing or improving propeny is added to Property and our product include a!! these costs, we are being aDowed Plant after deducting (retiring) the cost of the replaced to recover in cash att costs of the property including AFUDC. property. When we retire property, there is also a reduction The amount of AFUDC recorded in each accounting L - in the depreciation reserve (which is labeled " Accumulated period varies. The variation occurs because of (1) the ~ { Depreciation and Amortizabon"). number of do!!ars being spent on construcbon, (2) the Depreciation length of the construction period and (3) the rate used in computing AFUDC. In 1979, the rate was 8% ; in 1980, We show depreciation expense as a currerit cost of doing the rate was 8.75% ; and in 1981, the rate was 10.17E business to account for the using up of our property. U Depreciation is recorded equa!!y over the estimated useful Federal Income Tax life of the property. For example,if we estimate that an The depreciation expense reported on our.ncome state-item will be useful for 10 years, we charge one tenth of its ment is ddferent from the depreciation expense we use to } value to depreciation expense each year. calculate Federal income tax. There are several reasors for p An exception to this pnnciple is the Davis-Besse Nxt= the difference. First, the Intemal Revenue Service (IRS) L Power S:ation (Davis-Besse). Davis-Besse depreciation is does not aHow us to include AFUDC and certain over-l' based on the relationship of Qe amount of electric energy heads in the cost of assets which we depreciate for tax c it produces in the accounting period to the total expected purposes. However, these costs are ircluded in the cost of [ production over its useful life (see Note C). assets used to determine the depreciation shown on our G Amortization of Terminated Projects income statement. Second, the period of time over which the IRS allows the cost of assets to be depreciated is shorter In January 1980, CAPCO decided not to build four planned than the period of time (useful life) we use. Finally, the IRS p nuclear generating units. Before that decision was made. allows some of the depreciation we are entitled to in future considerable planning, engineering and design work was years to be used early. (This difference is caHed liberalized done for these units. As described in Note F, a portion of depreciation and accelerated amortization.) For income state-p these costs has been emortized and recovered in rates ment purposes, the tax reductions resulting from the use of g pursuant to a PUCO order. Recovery of the remainder has gjberalized depreciation and accelerated amortization are not p been deferred pending the ultimate outcome of our efforts recognized in the periods in which we obtain them They are to obtain relief Sm an Ohio Supreme Court decision deferred to the periods in which we normaUy would have t. denying us the right to recover and amortize such costs. obtained them. The deferred amounts are allocated to Our share of the unrecovered costs is included in deferred ' G. charges on our balance sheet as Unamortized Costs of income over the usefullife of property through a procedure ca!!ed normalization. , Terminated Projects. When we filed our Federal income tax retum for b Allowance for Funds Used During Construction 1980, the costs of our terminated nuclear projects were )E We pay interest and dividends to our investors for the use of deducted as an expense. Howear, on our income their money. This is called the " cost of money" The PUCO. statement, these termination costs were amortized over 10 j,, q4 ' 7 i r J b hb _ -. i , O i I' "d-

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) C hte B Deferred Feel i years, in order to match the costs with their related Federal i' l income tax effects, the tax savings were deferred and were : to be recognized in the income statement over a 10-year .We receive coal supplies for Mansfield Units 1,2 and 3 fran the Quado Mining Company (Quarto). Since May 31, h. penod. However, the PUCO issued an order in October 1980, when the development penod of the Quarto mines 1%1 te!!ing us to stop recovering temunation costs in rates. ,l We were also told to stop recording the deferred tax (see ended, the price of Quarto coal has included fuD production I t Note F) c sts and deferred development period costs. Quarto coal en shannah rnore apensNe hn comparaW When we pla:c new property in service during the lp year, the !RS allows us a credit against the tax due. This is r C d *"" I' 8 98 PUCO ordered us to eliminate [ called an investment tax credit. We record Federalirnome fr m our fuel fact r charged to customers the portion of l ? tax on our income statement as though it were not reduced the cost of Quarto coal which is above the general market by this credit. We recogn:ze the tax savings fmm th.is credd price for comparable coal. Since we were not recovenr.g all over the life of the property involved through the pracoce of these costs thmugh revenues, the PUCO also ordered us no-rnalization. n tt include the unrecovered amount in cunent operating 1 h Economic Recovery Tax Act of 1931 allows us to Expense. According:y, that portx>n of fuel expense was seH to others the tax benefits related to property placed in deferred. During 1981, about $21,700,000 of such costs e service on and after January 1,1981. Monies received fr xn, were deferred from expenses and not recovered through [; any such sales are being recognized ta the income state-rates. This dici nc.t result in any change in net income or ment as a reduction in taxes over the estimated useful life eamings per share. '. I of the property involved The PUCO stated in its order that it would allow Our Federal income taxes are lower because we can i I deduct our interest charges from income. This reduction rec very f actual Quarto coal costs, including any pre-vi usly deferred amounts, when the price of Quarto coal l of taxes is split between " operating income" and "non-O c,perating income" h tax reductions resulting from f r a six-month period drops to about 25% above pre-i interest on funds which are used on assets current!y being valling market prices for comparable coal. Steps are being taken in an effort to reduce the cost of Quarto coal. W j constructed are allocated to "nonoperating income" h tax reductions resulting from interest paid on a!! other PUCO stated that it would consider in May of 1982 4. funds are allocated to " operating income, whether to continue in effect, modify or terminate its cost recovery formula. Revenues As described in Note A-Revenues, since September Once a month, we either read each customer's meter or 1,1981 our rates are adjusted every six months to reflect estimate his usage and then bid him. We record revenues on changes in fuel costs. Under le new law, the ddferences the income statement for the month the meter was read or between the cost of fuel actually used and the costs included p usage estimated, regardless of when the bid is issued or paid. in the bills to customers are deferred.The deferred amount J The rates we charge customers for electncity and is considered in the fuel factor in a subsequent six-month steam have been made up of two parts. These parts are a Period. We were not allowed to defer such costs (except I " base rate" and a " fuel rate" Each month, the steam " fuel for the cost of Quarto coal mentioned above) under the L rate" is based on what we paid for fuw a that month. Prior previous monthly fuel adjustment method. Since the new k to September 1,1981, each month's electric " fuel rate" was fuel recovery method came into effect, actual fuel costs based on what we paid for fuel one month earlier. have been below the amount billed. The result was to Ohio law requiring a monthly electric fuel rate has reduce deferred fuel expense in 1981 by approximately been changed. We were required to comply with this new $10,000,000. law on September 1,1951 (see Note B). The new law "

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4 factor is changed every six months after a hearing before We calculate depreciation for our electric property by h( i the PUCO. multiplying our depreciable property by a composite depreciaton rate. The composite rate is one based on the pg' average life of all our assets. The rate also includes a factor When we make a payment for coal or oil,'It is recorded. for the money expc.cted to be recewed when we dispose of the { on the balance sheet as " Fossil Fuel Inventory." When we property (salvage) and the cost of dismanthng and removing i . make a lease payment for nuclear fuel, we record it on the tt (removal cmt). The composite rate used in 1979 was l p' balance sheet as " Deferred Charges-Other." As the fuel. 3.3% Since Anuary 1980, the rate used has been 3.4% l g is used, we transfer the co.! to the income statement as - The change to a higher rate in 1980 did not result in a fuel expense. material difference in our 1980 reported net income. ) Hydroelectric plant and plant held for future use have J$ their own separate depreciation rates. Rates ranging from y 4 w d n J g y-l e ? ~ v M w. _c - a _ c.p. _ ~a,. o .2 ; um Lau -c . ~ ~ _( m.. .,_ g y

jr i ,s y' ' J ', 3., i L 4' A D,, d v kb. [P. 1.8% to 8.33% are used for hydroelectric property. A rate depreciation method on penods prior to January 1,1979" [ of 3.75% is used for plant held for future use. His amount increased 1979 camings per share by lic. b in 1979, the PUCO allowed us to change the way we When a nuclear plant is retired from service, we wil! calculate depreciation for Davis-Besse. We had been record-have additional costs to shut it down. These costs are called ing depreciation on the plant based on 1:s useful life. Under decommissioning ccm. From 1979 through 1981, the the new method, we depreciate Davis-Besse in the pro-depreciation recorded for Davis-Besse included a factor for h portion of the electricity it produced during the accounting these costs. The factor was determined in 1979 and 1980 ll period to the total it is expected to produce over its useful estimar.ng that the decommissioning costs wot.ld be life. $20,000,000 in current dollars. The factor used in 1%1 By using the new method, our net income and was based on an estimate of $27,000,000. g eamings per share were increased $5,089,000 and 13c, We calculate depreciation for our steam property by p respectively,in 1979. If we had used the new method multiplying our depreciable property by a depreceon rate before 1979, the net income for prior yea s would have for each individual steam account. The depreciarc i rates l been higher by $4,125,000. We added this amount to iet used range from 2.22% to 3.42%. income in 1979 as the "cumulauve effed of change in t Not. D r.d.e.i l.co. T.a 4 Federal income tax, computed by multiplying the income before ! axes by the statutory rate of 46%, is reconciled to the amount provided as follows: U %d % of % of Pre-Tax Pre-Tax Pre-Tax 1981 income 1980 Income 1979 income Ghousands (Thousands (Thousands of Donars) of Douars) of Doaars) Book income before Federal income tax and cumulative effect of account:ng change _. 5207.184 5152,995 5142.461 Tax on book income computed at statutory rate _ $ 95.285 46.0 5 70,358 46.0 5 65.513 46.0 Decreases in tax due to: C Excess of tax depreciation over book depreciation (2,508) (1.1) 4,201 2.8 4.377 3.1 A!!owance for fun!s used dunng construction __ 38,180 18.4 30,325 19.8 22.616 15 9 Certain overhead. capitahzed on the books 2.526 1.2 2,267 1.5 3,738 2.6 Other items 5.637 2.7 5.953 3.9 5.855 4.1 43.835 21.2 42.746 28.0 36.586 25.7 Total Federal income tax expense 5 51.450 I. ~ 24.8 5 27.612 18 0 5 28.927 20 3 o Federal income tax expense is shown in the income statement as follows: 1981 1980 1979 F (Thomands (Thousands (Thousands U of Donars) of Douars) of Do8ars) Operating Expenses 4 [ Current tax provision 5 23,668 5 11,244 5 16.783 L Changes in accumulated G deferred Federal income tax: p l_iberalized depreciation and accelerated amortization 19,747 16,106 12,460 g.' Termznated projects (1,841) 21,944 Other items 8,361 (254) (2,098) y Investment tax credit deferred,less amounts amortized 1!640 p -(7.466) 11.082 t. Total charged to operating expenses 67,575 -li,574 38,227 Nonoperating income b Cunent tax provision (16.125) (13.%2) (9.300) gj Total Federat income tax exper.se 5 51,450 5 27.612 5 28.927 [ 31 W w.a_ wwn u- ~~~- ~ ~ = ~ -

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In January 1982, the Company appealed the PUCO's p,, poses. This happeneo prinopally because we deducted from ; n~l l taxable income the cost of four nuclear projects which were L October 1981 order to the Ohio Supreme Court and raised ' terminated in January 1980. The resuhing loss we had that again the issue of recovery of the termination costs.We year was applied against taxable income in prior years. ' also have raised this issue in the first of the two rate cases l c

. The income tax we paid in 1979 and 1981 was.

. described in the second paragraph of Note N. At December 31,1981, $7,263.000 had been recovered I L, ' reduced by investment tax credits of $13,907,000 and .through rates and recorded in the income statement as s l M $22,094,000,'respectively. Since we had a loss in 1980, we 5 Ecould not use any investment tax credit in that year. Invest-amortization expense. Accordingly, at that date,549,598,000 E.. ment tax credits which are available to the Company and of termination costs were unrecovered. As stated in Note V* heve not been used amount to $70,274,000. We can use D, the termination costs were deducted on our 1980 . these amounts to reduce tax liability through 1996., ' Federal income tax retum. When the resuhing tax re-6 duction is offset against the termination costs, the net . Not. E a sh.r o.s.ta ai.s unrecovered amount is reduced to $30,200,000. 5e number of outstanding shares of common stock of th[ ' . ' A contractor who worked on these projects has cla.med J Company changes during the year. We calculate camings 1 that we owe him $75,000,000 for costs he incurred. We per share based on the average number of shares out-. . are negotiating with the contractor to try to settle this g standing thmughout the year. ne weighted average shares matter. We have alread; paid more than $15,000,000 i outstanding in each of the '.ast three years were; towards the claim and this amount is included in the 556,861,000 mentioned above. We believe that tf we ' 979 ' 38,109,004 T, 1 we any additional money,it would be substantially less [h, 1980 43,300.451

1981 48,004,081.

than the amount claimed after credit for payments already n.ade. We believe, based on the opinion of our counsel, that [' y,,, p y,,,g,,,,g 7, m= ultimately we should not have to write off in one year the g; As stated in Note A,in 1980 the CAPCO companies unamortized costs. However, if it becomes unlikely that m ( terminated their plans to construct four nuclear generating relief can be obtained, then we would have to wnte off all units. The amount spant on these projects through December ' the unamortized costs (net of tax). Any amount deter- . 31,1981 was $56,861,000.The PUCO allowed us to mined to be due the contractor on his claim would similarly g recover almost all of these costs through rates charged to have to be written off. A write-off in one year of the dc customers over a 10-year penod beginning late in July. unrecovered termination costs (net of tax) would have a F L 1980. They also directed us to deduct these costs in the ' material adverse effect on camings in the year it is made,

b '

income statement as an operating expense oves the same. L but would not have a material adver.e effect on the finan-O 10-year penod (amortization).The portion of the termina- - cial condition of the Company. l y, tion costs which have not yet been amortized in the 'ncome : I n' statement is carried on our balance sheet as " Deferred i (, Charges-Unamortized Costs of Terminated Projects". l In July 1981, the Ohio Supreme Court ruled that the - ~t p* PUCO did not have authonty under Ohio law to authcrize 49 the Company to recover these costs through rates as ~ $U an operating expense. As a result,in October 1981, the f PUCO ordered us to discontinue amortization of the costs'~ h" ' h~ and to reduce our rates accordingly, but not to write off /s i l the unamortized amount without further order. Therefore/ ' ~ FJ ;j 7 for service provided on and after Oc%ber 27,1981, the. T' ' Company reduced its rates about 0.7% resulting in an ' W. o, S . estimates $6,700,000 reduction in annual revenues. We - 3 av also stopped amortizing the termination costs.His did notl, - ,' M result in any change in net income or camings per share; $+ - The Company appealed the Ohio Supreme Court (b, ruling to the United States Sup:eme Court. In January V c F-1982, that Court refused on procedural grounds to hear " ~ N, /our appeal The Companyis continuing b the proceedmgs 1 > described below to seek authorization to recover the M~ +

'to raise the issue again in appeals to the United States 2., '.

unamortized termination costs through rates. We intend i n, f [ 1'.. - e , /,, I-s u u-< l* m4 r p.t pi 9,%.J& [ &W&}.1.. U$ . b* '* \\ Q ; ?Y ,'r, .'e 3 . ',, 4 ' lR 1 s 7-t' 4,. W e _, f*P'Q m(.N y?@?YW.i A ,'Q n Q%r w, f. .~ 1?..&.. fv W, y ts > 1 w.L 'a, F 'E,,' 'pm 'D,f i

t 1 4 s pl y c, 3 1 a m, 4 .j-4 ym y ^ y; Not. G ne. moei.. no.a. w.HL ( Se Interest At December 31 ' As part of our operations, we have entered into the L Due issued Rate 1981 1980 foDowing leases ,I' (Thousands of DoBars) Type Remain ng Terms 1982 1947 3% $ 20,000 $ 20,000 %, g3 g e. 1983 1975 8.85 % 50,000 50,000 Unit trains 5 9 years (b) 1983-A 1980 9%% 74,700 74,700 9 1984 1977 7.55 % 25,000 25,000

• [*'*, eg N shrf 1984 A 1980 12%%

30,000 30,000 p ases 1985 1950 2%% 25,000 25,000 o'fice equipment L havmg a fixed noncancelable Construct on and term of less than one year F. 1985-A 1980 11% % 18,291 18,291 1986 1951 3%% 25,000 25,000

• • I""*"' " " # "*"

1986 A 1976 5%% 4,000 4,000 (a) We had a lease for the f rst core of fuel at Dava Besse through the 1986 B 1976 5%% 1,000 1,000 rmddle o 1981. The lease for reload fuci win last as ions as it takes us to 1989 1954 3% 20,000 20,000 bum the fuel For the reload lease, we pay reat whenever the fuel a 1989 A 1981 15%% 40,000 buined and we pay a rnonth4 interest charge on the value of the fuel 1990 1%9 7%% 60,000 60,000 we haven 1 used. 1991 1%9 8%% 35,000 35,000 (b) Unit train leases include renewal opons through 2011. The lease 1992 1981 15%% 20,000 br efhce space can be renewed for two hve-year periods-1993 1958 3%% 30,000 30,000 When the PUCO determines what rates are to be 1994 1959 4%% 25.000 25,000 charged to our customers, it includes the rents on aD of the -A 4 es as an opeaMg apem Acc&gh, we e 2009 1974 9%% 50,000 50,000 rec rd those rents on our income statement as operatng 2009-A 1979 7% 50,000 50,000 expenses. Financial Accountmg Standard No.13 would iN 2009 B 1979 7% 1,000 1,000 treat our leased nuclear fuel and unit train coal dehvery "J 2009-C 1979 7% 1,000 1,000 equipment as though we owned it. This would require us 2010 1975 9.85 % 100,000 100,000 to record the properties being leased as assets which would 2011 1976 8%% 125,000 125,000 be depreciated. Also, we would have to record a long-term r-2011 A 1980 (a) 48.600 48.600 debt for the promises to make lease payments. If this 2011-B 1981 (b) 22,200 accounting treatment were foDowed, it would not result in 2012 1977 8%% 75.000 75,000 any matenal changes in our balance sheet or our income g 2013 1978 6.20 % 47,500 47,500 statement. 1,112.291 1,030.091 All the payments we make for nuclear fuel and unit p' Less amounts classified as current 20.000 trains are recorded in balance sheet fuel accounts. The costs $1.092.291 $1.030.091 in these accounts are transferred to fuel expense on the in-come statement (see Note A-Fue!) when the fuelis used. (a) The interest paid on tLse bonds is at a vanable rate. That rate can w no lower than 6% and no higher than 12%. The average rates in We paid $7,925,000 in 1981, $7,240,000 in 1980 and 1980 and 1981 were 10 03% and 9 99%. respectively 58,932,000 in 1979 for nuclear fuel and unit train leases. (b) The interest paid on these bonds is at a vanable rate That rate can e paymen er a ases wae not mated be no lower than 6% and no h gher than 14%. The average rate in 1981 Some of our leases have noncancelable terms of was 10.40%. more than one year. We have to make the following pay-b First Mortgage Bonds are issued under our Mortgage. ments for these leases after December 31,1981: That Mortgage creates a dtrect lien on almost all the Year Amount property we ov, and franchises we hold. (Thoa'.nds omane The Co!!ateral Pledge Notes included in the Statement 1982 5 2.839 of Capitahzation were issued under an agreement signed in 1983 2,839 L 1980. The agreement lets us borrow up to $60,000,000 1984 2.601 over a two-year period. The interest rate on any of the 1985 2,344 e borrowings cannot be higher than 15%%. We have delivered hd8 8 y,,,, 560,000,000 of our First Mortgage Bonds as security for our obligabon to pay the Co!!ateral Pledge Notes issued Total $16.083 j,- under this agreement. These bonds are not considered t be outstanding on our books. However, they are out-We did not include in the above table the payments standing under our Mortgage. we must make on our Davis Besse nuclear fuel reload lease. S nce payments are made when fuel is used, we g;. don't know when we will have to make payments. How-e ever, we do know we must pay the zssor a remaining total of $6,694,000 for rent. i 33 L~ 2 _ -....1c-w.. w-

n .s p ,f;; s' O V g 6 ~ Notes to Consolidated Financial Statements y ( Note I Serial Preferred and Preference Stock with pay (plus dividends accrued to the redemption dates) Mandatory Redennption Provisloes are as foDows: I Some of the Serial Prefened Stock we have issued is subject - Redempton to mandatory redemption. These provisions require us to Series Date Pnces buy back and retire outstanding shares on certain dates. Preferred C July 31,1983 and pnor $110.00 H The table below lists those redemption obligations: August 1,1983 and thereafter $ M3 00- $101.00 b Shares to be Redeemed Begmning Redemption Prefened E May 31,1986 and prior $1,088.00 Series Annually On Prices (a) June 1,1986 and thereaher $1 M M W N C 10,000 8 1-84 $ 100 E 3.000 6-1-81 $1,000 Preferred F February 28,1982 H 1,782 6 1-85 $1,000 and pnor $1,055.00 1 1,%9 6-1 86 $1,000 March 1,1982 and h (a) Plus dMdends accrued to the redemption date thereafter $1,035 00- $1,000.00 I The total amount to be paid for these redeemed shares Prefened G December 1,1983 through November 30,1984 $1,035 So, i, n each of the next fu years is: December 1,1984 and t I 1982 $3,000,000 1985 45.782,000 thereafter $1,026 67- $1.000.00 1983 $3.000.000 1986 $7,751,000 Prefened H June 1,1990 through p 1984 $4,000,000 May 31,1991 $1,068 68 t h if for some reason we cannot buy back the shares,the June 1,1991 and thereafter $1,06105-51,000 00 unredeemed shares would oe added to the next year's l redemption obligation. This would continue to be done Prefened I June 1,1991 through t until the total obhgation to redeem is met. May 31,1992 $1,068.68 g Some of the Serial Preferred and Preference Stock we June 1,1992 and 1

~

have issued includes a provision which re tuires us to ask thereafter $1,06105- $1,000.00 [ the owners of that Stock whether they want us to buy back o ferred J June 1,1981 through re their shar;;s, as foDows: May 31,1987 $1,050 44 {* June 1,1987 and thereafter $1.037.83- $1.000 00 [ Shares Preference 1 August 1,1981 through Subject to July 31,1982 $1,038.75 Purchase Offer Purchase August 1,1982 and Annually Beginnm3 on Prices thereafter $1,032 29-$1,000 00 Preferred Series F 57 11-1-85 51,000 Preferred Series G e, ,0 8-1-84 $1,000 We can buy back Series E before June 1,1986 and Preference Senes 1 11,400 4184 $1,000 Senes F before March 1,1%2 only under certain condmons-i. If the owners decide to sell, we must redeem the shares Any borrowed money we use to buy back the shares en-f four months after the date we offer to buy. If they decide not be borrowed at an effectwe interest cost of less than [ to sell all the shares which we must offer to buy over the 8.8% for Series E and 7.5% for Series F. Also, we may next five years, we would have to pay for those shares not use money from the sale of other preferred stock or $19,400,000 in both 1984 and 1985 and $36,%7,000 stock ranking higher than Serial Prefened Stock if its P in 1986. effective duidend cost is less than 8.8% in the case of We have assured the owners of our Senes F stock a Series E and 7,5% in the case of Series F. Finally, we may r7 U minimum retum on their investment of 6.%% after not use money raised through the sale of stock which is deducting their Federal income tax on the dividends re-Junior to the Series E or F. E ceived on the stock. If certain income tax laws are changed Sales and retirements of Serial Prefened Stock nh L such that their after-tax retum is lower, we would have the mandatory redemption provisions during the three years p option to do one of two things. We could buy back the ended December 31,1981 were as follows: Series F at $1,000 per share plus accrued dividends or we

• • * *""d l p

could exchange Senes F for a new preferred stock. The Year Series Pnces Shares new stock would have a dividend rate high enough to [' provide a 6.%% after-tax re,am. 1980 Prefened H $1,000 28.500 L We have the right to buy back and retire at certain 1981 Pr 1 5,000 3 times shares of Serial Preferred and Preference Stock which have mandatory redemption provisions. The times Preferred K $1,000 10.000 when this may oc done and the prices we would hace to 34 Prefened E $1,000 (3,000) ,.~ _ .j m__ b m

- ~ - - - + n. (7 ~ . U ', E 4 y' ' 7, s. ir-r y [m,.. p Note E Serial Preferred Stock Without Mandatory - Stock Plan and the 1978 Key Employee Stock Option Plan medemption Provi.lon. - are granted at 100% of the fair market value on the date of +h During the last three years, we did not sell or buy back the grant. The shares which were actually bought during any shares of our derial Preferred Stock which did not have the three years ended December 31,1981 were sold at mandatory redemption provisions. However, we have the option prices ranging from $17.63 to $18.59. Shares under i right to buy back ana retire this Stock. The tirr.es when this outstanding options held by en ployees were as fo!!ows: may be done and the prices (plus dividends accrued to the Key Employee I. redemption dates) are as follows: Incentive Stock Nn (a) u 1981 1980 1979 Redemption D Series Date Prices Options Outstanding at ta December 31 L Preferred A December 1,1981 and Shares 150,095 154,148 166,849 thereafter $102.50-5101.00 Option Price 517.63 to $17.63 to $17 63 to h Preferred B July 31,1982 and prior $106.35 522.43 522.43 522 43 ( August 1,1982 and y thereafter $103.78-5102.26 1978 Key Employee Stock Option Nn 1981 1980 1979 Y. Note K commo. Shore. i...ea..a n ervea ro, i...e op,,,n, o,,,,,ng,ng,, Shares of Common Stock sold dunng the three years ended December 31 December 31,1981 were as follows: Shares 244.425 251,375 202,775 3 Option Price $16.94 to $16 94 to $17.88 to 1981 1980 1979 520,25 $20 25 120.25 l Pubhc Sale 3,500,000 4.000,000 4,500.000 (a) Under the terms of the Key Employee incentne Stock Pan.no I[,', Share Owner further opuons may be granted Accord:ngN. on4 those shares relating Dividend P" "5 "*"d'ng at Decemter31,1981 may be issued. Reinve>tment and Stock yog, L Short.Teran Borrowing Arr.ngeme.t. Purchase Nn. 926,542 733,188 557,1A Employee Notes payable to banks and others were as follows: Savings Plan p Employee Thnft Nn_ 264,605 218,902 164,988 74,727 64,4 % 50,236 At December 31. Key Employee Type 1981 1980 A Incentive Stock %,,,a, a 3,; e y; Nn 469 3.846 Bank 1.oans $19,400 5 17,087 Total 4.765.874 5.017,055 5.276.209 Commercial Paper 75.900 149.850 p u-in January 1982, the Company sold an add tional $95.300 $166.937 4,000,000 shares of Common Stock to the public. Available bank creda arrangements are as follows: At December 31,1981, we had five stock purchase plans available for our employees and share owners. The At December 31, common shares which are set aside to be used for these Type 1981 1980 plat.s (including unused stock options) are as foDows: Bank lines of credit (borrowings Employee Savings Plan _ 115,M 1 at or near pnme interest rate) $209,600 5169.600 Employee Thnft Plan 604,102 Share Owner Dividend Reinvestment Eurodollar revolving credit-agreernent $30.000 $30.000 F and Stock Purchase Nn 641,512 Variable interest note Key Employee incentive Stock Plan 550,250 (a) agreements 520,000 $20,000 l 1978 Key Employee Stock Option Nn 600,000 t' 2.511.845 AH bor owings under the Eurodollar agreement are b made and paid back in U.S. do!!ars. There are no require-ments that minimum cash balances (compensating balances) t. The Company plans to take action, including share owner be maintained at the banks involved. Howeur, a fee of approval at the April 1982 Annual Meeting, to make an %% to %% per year is paid on any unused part of this / additional 3,000,000 shares available for sale under the borrowing agreement. The interest rate on borrowings Employee Savings Plan. is %% above the rate which specified banks pay for Stock options held by employees to purdvse unissued Eurodo!!ar deposits in the London interbank market. shares of Common Stock under the Key Empk.yee incensve Borrowings under the variable interest rate agree-35 L n. -_,_ uw-o- sL ~~ w -

L s V O Notes to consolidated Financial statements a i ?: ment must be paid back whenever the bank requests such customers an additiona! $46,000,000 in 1979, 547,000,000 repayment. Interest is be. sed on the rate for high qt.ality in 1980 and $133,300,000 in 1981. commercial paper in the 30-180 day maturity range. In 1981, we asked the PUCO for another $*30,000,000 t Commercial paper and variable interest notes out-increase. The PUCO completed public heanngs early in standing are backed by no less than an equal amount of 1982. Any increase granted would begin to be coDected in 4 tmused bank lines of credit to ensure the Company's ability the first quarter of 1982. We have also informed the PUCO to repay them. that we will be seekmg an increase of another $221,000,000. f The unused portion of the above credit arrangements, Any increase granted would go into effect early in 1983. after deducting bank lines held to cover outstanding com. On January 1,1979, the PUCO allowed us to increase mercial paper and variable interest notes, amounted to steam rates by 25%. On January 1,1980,it allwed us I another 5% increase in these rates. Because of these b $144,300,000 at December 31,1981. F 'Ihe average daily cash balance in bank accounts was increases, we charged customers an additional $2,300,000 $5,700,000 in 1981 and $5,700,000 in 1980. This balance in 1979 and another $400,000 in 1980. In January 1982, satisfied informal compensating balance arrangements the PUCO approved another 47% increase which amounts W under which we maintain balances at banks of $3,000,000 to approximately $7,000,000. In February 1982, we filed to $6,000,000, depending on the amount we borrow. an application for an additional annual inaease in steam rates of approximately $2,400,000. Any increase granted m Not. M co. it ..t...a co.ti.... i d @ iygg,j,T,*,y,{we have an appucation for a g,, We plan to add $1.8 bi!! ion of new plant and equip-rate increase covering sales for resale to the Cleveland g me.it over the next five years. Some of the material and municipal electric system pending with the FERC. We services needed to build new plart and equipment must be began collecting the requested $2,300,000 increase in ordered now so it will be ready to be used when needed. September 1981 subject to refund, dependent on the At December 31,1981, such commitments amounted to: outcome of formal hearings. Construction Program 5206.000,000 Nuclear Fuel Enrichment Services 5 97,522,000 Not. O property o ..a.ith other utiitti r Advance orders are necessary in our business. UsuaDy Some of the generating umts which we own or are buildmg we can cancel orders but we must often pay the manufac-are owned with other utihties Each company owrts an F turers for what they have a! ready spent for labor and undivided share in the ent:re unit. All the owners are I materials and sometimes a cenalty. " tenants in common" Each company has the nght to a We have agreements to lease nuclear fuel we expect percentage of the generating capabihty of each umt equal to need in the future for up to approximately $213,000,000. to his ownership share. We are obhgated to pay for our The cost which the lessor has already invested in nuclear share of the construction and operating costs of each unit. matenal was $91,667,000 at December 31,1981. We are not responsible for the other owners' shares. Under two long-term csal purchase arrangements, we Utlity Plant at December 31,1981 includes the foDowing have agreed to guarantee the mining compnies' loan facilit.es owned as tenants in common with other utihties. and lease obbgations. At December 31,1981, the principal amount of the mining companies' loan and lease obbgations Company Ownership l was $86,916,000. Under one of these arrangements, we Construccon ,j. are required to pay the mining company any actual out-Dectnc Work I of-pocket idle mine expenses, as advance payments for Facihty Per Cent in Servre in Progress coal, when the mines are idle for reasons beyond the %nu pa,m control of the mining company. Davis Besse 51 38 5392,446 5 18,171 Several lawsuits and govemment actions are pending Bruce Mansheld 1 6.50 24,503 546 28 60 110,676 2,241 against the Company. We beheve, based on the opinion of Bruce Mansheld 2 i our counsel, that the ultimate disposition of these matters Bruce Mansheld 3 24.47 155.373 911 should not have a matenal adverse effect on our financia] Beaver Va!!ey 2 24.47 279.888 condition, although an adverse final decision in certain Peny1 31.11 304,703 2 109Il05 instances could have a material effect on income for the 1 3 ge 5 6 period in which it occurs. Seneca Pumped Storage Hydroelectric Plant 80.00 54.704 44 [. Not. N not. u.et.e. 5s46 807 5888 892 ] 1 The PUCO allowed us to raise electric rates by 9.2% on May 8,1979, by 9% on July 14,1980 and by 17% on Separate depreciation records are kept for Davis-Besse I May 6,1981. Because of these increases, we charged pronerty and Seneca property. The accumulated depreciation k b _, _ m l. _, _ _, ~ u a m,,._,.... _. _... _.

m,SgWP: V T %T a.WER . Y 4WFW"" @&meBNm,v,aly w F W- ,w L. sn ",-W. e =,s 9; 39 Q L W M 5q.; M 1; N W R y ~

• P c; G e -

L..' - ' " % whQ; L RW a ?w;, %, uL. a[C ^ ;,yW 7, q

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y 8 WL l; ud 8 ': v{'W-s, i F m%,7 - t ;w ,g 1 - c ~ qt . + < ~ s .. 7, r' Q M W @%,; % (c 3 WL V T % q%.t

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. i ~ 1, (' go' n: 't, u ^* ).,i, y ,4-N s ,7 x 1 w. c ? ~ ~ ~ (t? The~ accumulated depreciation for Seneca at December 31,,

• account changes in an employee's future camings. It results

for Davis-Besse at December 31 1981 was $30,923,000,,

' pension plans use this method. This method takes into ,1981 was $10,354,000. Depreciation on aH other property in an orderly way to try to assure that adequate funds wlH E owned with other utilities has been accumulated on a. be available to pay future benefits By using this method, compostte basis along with aD other oepreciable electric c the assets in the plan at January 1,1981 were about equal E* property rather than by spec 6c units of deprecable property to our total future liabilities under the plan at today's value. Our share of the operating expense of properties owned Statement of Financial Accounting Standards No. 36 - E, with others is incladed in our income statement. (FAS-36) requires us to disclose future liabil: ties ignoring g' 4 S. ' increases in employees' future camings. Therefore, the dis-Not. P r 5 ~ closures below, required by FAS-36, compare assets We pay the fuD cost of a pension plan for our employees. ' accumulated on one basis and liabilities determined on a j Under this plan, fuH-time employees who have worked at ^ different basis. We and our extemal pension consultants l the Company at least five years and retire between ages 55 believe that the FAS-36 disclosures are misleading because and 70 receive pension payments from the pension fund. they understate the amount which ultimately wiD be needed The employee's pension payments depend on how long to pay aD of the plans' benefits. We are making the follow-he worked with the Company and how much he camed. ing disclosures only because we are required to do so. However, as permitted under The Age Discnmination in Employment Act Amendments of 1978, an employee who """*'YI ,.( works past age 65 does not eam extra credit for that time. 1981 1980 if he retires before age 62, his payments are reduced. The 0"*=ad de s plan also pays benefits when an employee dies or is disabled. Actuarial Present Value of We deposit money into the plan to cover the benef ts Accumulated Plan Benefits: the employees cam currently. We also deposit money t Benefits which are vested $122 $110 Benefits which are not vested 12 4 4 cover the benefits arising from amendments to the plan and j) adjustments for the investment performance of the pension $134 $114

s fund. In 1979, our total payment inte e cension fund Value of assets held in Plan

$193 $163 was about $8,600,000. We deposited,%ther $9,300,000 in 1980 and $10.200,000 in 1931. Of these amounts, we Under both methods, the one which we use and the recorded on the income statement as an operating expense FAS-36 method, the expected retum on the assets in the $5,687,000 in 1979,56,132,000 in 1980 and $6,659,000 plan needed to pay aH future bene ts was 5% in 1979 t in 1981. The remainder was recorded in the balance sheet and 6%% in 1980 and 1981. mostly as construction costs. l The amount we put into the pension plan is based on an actuarial formula called entry age normal. Many private Note Q Quarterly Reemits of Operatione (Umaudit.d) The foBowing is a tabulation of the unaudited quarterly results of operations for the *wo years ended December 31,1981. Quarters Ended 1 March 31 June 30 Sept. 30 Dec. 31 ea m==nds. -pi pn d= =nounw hl Total operating revenues $217,433 $198,767 $247,326 $230,039 Net operating income $ 30,047 5 30,873 $ 49,440 $ 40,154 J Netincome ' $ 24,913 $ 25,052 3 43,830 $ 31,587 Eamings available for common stock $ 18,516 $ 18,598 5 36,400 $ 24,157 e, Average common shares 41,398 41,645 43,860 46,147 Earnings per common share .45 .45 .83 .52 g-F- -1981-O. Total operating revenues $229,625 $237,320 $297,783 $248,203 Net operating income S 38,930 $ 41,822 5 67,759 5 44,189 3 Net income $ 27,801 5 32,117 $ 56,872 $ 38,944 '+ P ~ Eamings available for common stock. $ 20,371 5 23,682 3 47,432 $ 29,332 f[y, . j-Average common shares 46,445 46,777 47,959 50,914 "Eamings per common share $,.44 .51 - S .99 .58 c m o J 37 [y-di ~ A v . t M>' ,e_ 'e ww .n ew, -.k gas,u m.,,_ a.,sp 5, g.f'" " { 3 l '. ',f.. , f.,, ) b* *, ..I [. b . lig ,1 .(( ' -[- .*"F -,/', + *, i s s

g. ,n m-3 xf v ~ s s s r L inancial and Statistical Review 1971 -1981

(

~ 1 1981 W80 1979 ,n TOTAL OPERATING REVENUES 1,012.930 893.5t* 824it W' A-Resdential 310.409 ~28.787 zJ Commeraal 263.608 220.677 I5 1F- ~- W Industrial 396.805 323.764 122.90 Other Electne (bdudes Sales for Resale) _ _: 39.912 6' 273 M.77 Steam Heating 12.196 15 On5 a 04, ~'o 1 TOTAL OPERATING EXPENSES 820 226 143 051 6xs s ^ c-3 Fuel and Purchased Pour 362.093 759.388 348.0tS Other Opeating Expenses 213.616 195.340 163.59 I Depreciabon and Amornzation 8534 44.619 59 44 ~ Taxes Other Than Federal income Taxes _,.c_ 91.648 al.630 19.45' t Federal bcome Taxes 67.575 41.574 3R 27. NETOPERATING INCOME n ?.704 150 515 135 47' 4' ~- 'k G NONOPERATNG INCOME 75.712 62 4to Income Statement Allowance for Ecbunds Used Durr.g Construcncn F a.we 40 873 33 43 Other income ano bons 263 21 '4 7 14 18-p (Thousands of Dollars) INCOME BEFORE INTEREST CHARGES 2tr 416 212 e 1 41,0 INTEREST 112 682. 87 m-og 1.cng and Short-term lnterest 146.712 112.6M ' 85.29 / A5owance for Borrowed Funds Used D mg Construenon _ (34.03i e (25 orrr (15 73 ~ m INCOME BEFORE CUMULATIVL EFFECT OF ACCOUNTING CHANGE , 155.734 125.383 113.53 Cumulatiw Effect of Change in Depreaanon MetMd L lS on Penods Pnor to January 1,1979 -.V 4.12 NETINCOME (a) 155.734 " 125 3R3 E PRETERRED AND PREFERENCE D(VIDEND REQUIREMENTS 34.917 27 711 - IP 65 ?g 6 EARNINGS AVAILABLE FOR COMMON STOCX 120 817 - 97 672 92 07 L EARNINGS PER SHARE BEFORE CUMULATIVE [ EFTECT OF ACCOUNTING CHANGE S 2.52 8 2 26 5 23 CUMULATlVE EFTECT PRIOR TO JANU/,RY 1,1979 1 TOTAL EARNNGS PER SHARE (a)(b) 5 2.52 5 2 26 5 24 i-DMDENDS PER SHARE (b) 5 2 08 2 00 19 .o ,(; TOTAL ASSETS 34085{ 3 w4 462 2 678 78 Ut:hty Plant -Total 3.6 L. 895 3.215.ro 2.842.25 c. Accumulated Utahty Pet Depra tanon and Amort:m)on (621.353) (557.859, (521.17 Other Proper +v 23.870 21.137 71 Current and Other Assets 392 663 415 845 3 TOTALCAPITAUZATION ANDUABILITIES ~ 3 40r n75. 3 094 4e2 2 67n d am bd Long-term Debt Near end PreferTed and Preference Stock 1.328.404 1.211.528 973.99 ( (Thousands of Dollars) With Mandatory Redemphon Provisions 328.000 260.5W. 232.00 Without Mandatory Redempbon Provtsions oc />N 95 Oil 95.07 g Common Stock Equity 1.0LLM > 912 731 820,41 Deferred FederalIncome Taxes 236.48! 7 I92.452 162.12 ( Current Liabihties and Other Credits 415 913 422 180 39s 19 UTILrrY PLANT ADDITIONS (c) 409.2$ 39% N rq So UTILITY PLANT I.ETIREMENTS 13.121 25 002 11.61 NUMBER OF COMMON SHARES (b) _. 51.054.503 46 2sF 6M 41.2). 57 KWHR SA!.ES (Thousands) 7 7 507.864 18 1s9 754 79 6 43 p e, Resdential 4.375T32 4 463.147 7 352.98 Commercial 4.178.459 4 148.990 4.041.17 Industnal 8.279.700 en.0t,2.172 9.268 60 i ELECTRIC CUSTOMERS-YEAR END ~ 673.973 14a5445 1 36' 73 Other (includes Sales for Resale) n 1.325 7to 557 70s 21 ) Resdental 642.925 642.845 641.85 Commeraal 60.714 60.070 58 69 's industnal 7.261 7.210 7.23 f Other 425 432 44 4 RESIDENTIAL SAI.ES DATA Average Kwhr par Customer 6.548 6 686 6.55 Average Revenue per Customer s 466.55 5 405 09 5 357 8 Operating Statistics Average Revenue per Kwhr 7.12C 6 05c 54 I ELECTRIC PRODUC110N Net Available for Servtce Area (Thousands) 18 936.567 18 7z23 19.64s 0i s Net Generanon 17.297.523 15.323 M8 17.069.91 Net Recewd from Others 1.6N044, 3 398 66R 2 575 N BTU per Kwbr of Net 10.58' 10.635 1*, 63 Fuel Cost per MJhon 175l4C . 3 39 31 5 35 2 156 92c 142 5 Coal Cost per Ton 46 70 Annua! Net 60-Man. Max Load KW-Excl. intenuptbles 3.3t>2.000 3.n4 000 3.097 m Net Synem Capabdry-KW-Year End 1,623.000 a 3l4.000 4.562.M STEAM HEATING Sales-Pounds (Thousands) 1.6i2.151 1.979.397 20 Customers-Year End 337 348 EMPLOYEES-YEAR END 5.189 4,991 4 96 S' (a) The 1978 net income and samtgs per share calculated on a pro forma bass to reflect the unes of-production method of deprenatr y;, ~ are $102.942.503 and $2.31, respectmeh The pro forma effect of the adophon of the depreenhon method on 1977 was not mater p, i. 08 ? aa %. m,,, m , s.c s w._ am _a .m

,Wj w g s c.. w,7 p = e -m +- ~, - r- -,, m y, y 1 y e g' . e 4 e,. v The Cleveland Electric Ilhlminiting Company and Subsidiaries " 1978 1977 1976 1975 ' 1974 1973 1972 1971 ,. - 7 i~ 659 3 543.148 523,165 463.937 328.768 293.343 270.721 d !JO 200.765 160.015 154.020 140.030 104.379 98.891 93.131 25. 165.049 129.286 121.653 109.185 80.756 74.992 70.216 j%,278.4C b., 251.181 197.189 180.890 177.246 119.964 99.926 92.519 g 1 F.. 42 831 31.611 45.730 55.679 29.946 17.832 13.966 10.709 . \\0085 -f 10.684 10 928 10.923 7.530 5837 5.568 4,146 599 289 <._ 542.871 441 401 433 614 375.159 255 276 224.473 20H 397 306.036 259.707 231.564 243.369 218.648 100.450 75.199 69.698 147.389 133.394 105.337-98.154 65.836 72.795 71.722 66 002 4 56.774 ' 43.307 35.874 33.046 31.632 30.965 27.336 25.433 E-68.756 58.807 51.925 48.735 43.653 40.906 36.203 32.556 25.334 47.656 16.701 10 310 15 390 10.160 14 013 14.708 117.803 116.419 101.747 89.551 88.778 73 492 68 870 62 324 4? 226 49.4A4 26.346 17.681 8 472 7.642 5.567 4 023 29.890 35.265 24.706 16.983 7.854 6.363 5.958 3.908 I-17.336 14.219 1640 698 618 1.279 (391) 115 160.029 165 903 128 093 107 232 97.250 81.134 74 437 te.347 6: M6 54 175 46 413 42 464 36.509 31.720 25 365 24 6M4 72.071 67.889 56.750 50.511 44.717 35.161 27.907 26.697 (11.055) (13 714) (10 337) f8 047) (8.2081 (3.441) (2 542) (2.011) L 99.013 111.728 81.680 64.768 60.741 49.414 49.072 41.663 99 013 111.728 81 680 64.768 60.741 49.414 49 072 41 663 23 575 2z 907 18 006 14 696 10.067 7.658 5.118 175 75 438 88 821 63 675 50 072 50.674 41.756 43 954 414MM l' 2.20 5 2 91 5 2.38 2.11 5 2.45 5 2 03 5 2 15 5 2 04 P' 2.20 2 91 5 2.38 5 2.11 2.45 8 2.03 2 15 5 2 04 1 84 1.76 S 1.71 S 1 65 1.60 S 1 55 5 1 52 5 1 49 2.331 541 2.117,135 1 M2 999 1 513 247 1 354 065 1 152.335 1.057.091 895 641 2.523.996 2 232.111 1.955.701 1.693.614 1.526.659 1.364 122 1.228.840 1.10t>.797 (476.983) (429.150) (3%.338) (373.851) (355.841) (334.071) (313.109) (297.385) 15.034 13.753 12.849 9.942 7.433 5.331 5.340 4.418 9.494 300 421 270 7R7 183 542 175 814 116.953 136 020 81 811 I.331.541 2 117.135 1842 9W 1 513 247 1.354 065 1 152.335, I057 W1 895 641 z 920.973 885.899 747.392 673.003 553.144 502.800 491.W4 391.750 232.000 185.0 w 135.000 75.000 63.000 25 000 %.071 95 071 95.071 95.071 95 071 95.071 95.071 50.000 ?, - ?06.883 633.744 511.333 419.990 346.756 326.947 314.542 299.539 1:0.677 119.299 72.318 63.267 43.348 34.312 34.444 30 479 233 937 198 122 2818R5 186 916 252 766 168 205 121 730 123 R73 300.765 2e6.739 275.524 181.673 173.899 145.*70 134 693 123.241 LL 3.880 10.329 13.437 14.718 11.362 10.188 12.850 12.062 , 35.995.365 32.393.055 28.347.544 24.351.499 20.748.110 20 611.034 20.499 420 20.400 326 18.364 437 M 066 428 18 070 291 18 133 826 17.601.6R6 17.747 663 15173.04a 14 064 775 4.288.865 4.200.116 4.045.158 3.984.004 3.830.305 3.910 018 3.730.365 3.530.655 3.933.586 4.007.123 3.808.897 3.685.878 3.527.382 3.569.689 3.356 419 3.144 640 8.992.919 8.874.7 % 8.475.983 7.822.419 8.819.205 9.103.173 7.298.700 6 813,918 1,149.067 984 393 1 740 253 2 641.525 1 424.794 1 164 783 787.564 575 562 702 538 6 % 547 693 425 689 133 6A4.728 674 426 672 165 663 749 632.740 630.581 627.719 623.988 618.266 612.845 605.8M9 (, 637.609 57.3W 56.241 55.178 53.765 53.070 52.291 51 645 50 285 C 7.167 f* 7.112 7.206 7.190 7.212 7.415 7.222 7.122 452 454 460 459 458 454 453 453 6.517 6.412 6.187 6.116 5.914 6.098 5 864 5 604 1 324.91 5 307.11 5 245 16 5 237 02 5 216 69 5 162 69 5 155 45 S 147 89 [ 5 00C. 4.63c 3 97c 3 88c 3 67c 2 67c ,2 6sc 2 64c 19.254 857 19 098.231 18.331.384 17 271.169 17.817.763 18 257.155 161016R9 15 I14 965

16,88?.669 18.123.528 16.747.626 16.213.012 18 040.100 17.326.640 15.404.233 14.953.520 2.37? 188 974 703 1.583 758 1.058.157 (222.337) 930 515 697.456 161 445 t

10.536 10.401 10.322 10.454 10.569 10 382 10.172 10.256 - 13180c 117.50c 105 SSC 111.14c 102 26c 48 40c 42.86c 40 51C ' i.'3.249.000 i. 30.73 5 25 72 5 23 98 5 24 93 21 53 5 11 05 5 9 94 5 9 03 3.350.000 3.065.000 2.937.000 2.934.000 3.119.000 2.822.000 2 750.000 4.566.000 4.386.000 3.906.000 3.615.000 3.764.000 3.769.000 3.775.000 3.400 000 886 2.374.510 2.359.677 2.263.645 2.274.925 2.154.390 2.450.656 2.390.495 ff 369 372 385 399 406 416 427 450 L 4.831 4.790 { 4.840 4.947 4.982 4.853 4.898 4.972 H Adrused for he 3-for.2 we spht, eheceve December 16.1977. d Exdudes 5% U22.606 of sermmated projects reclass6ed to Deferred Charges m 1979. I l 1. \\ %.s N 39 i s ,g- .__k- ..A-a'. mabL k gg gg ^i,, pap p, a--Gg g s 8 - a h.i

7 g-n.. _ _.-7. -. - - 7, ) l V l ?^ The Cleveland Electric illuminating Compangnd Subsidiaries Otat; ment cfincsm2 frcm continuing operations adjusted for changing prices for the year ended December 31,1981 (unaudited) m T Conventional Constant Do!!ar Cunent Cost ( Historical Average Average Cost 1981 Dollars 1981 Do'lars m ) L crwumna.or ce l Revenue $1,012,930 $1,012,930 $1,012,930 ~ Operation expense 500,784 500,784 500,784 [ Maintenance expense 74,925 74,925 74,925 h Depreciation and amortization 85,294 171,699 195,005 / Taxes other than Federalincome tax 91,648 91,648 91,648 i Federalincome tax 67,575 67,575 67,575 i Nonoperating income (75,712) (75,712) (75,712) Interest expense 112,682 112.682 112,682 F t 857,1 % 943,601 % 9.907 Net income-continuing operations 5 155,734 5 69.329 (a.i 5 43.023(a) w. Increase in specific prices of property and plant (b) $ 309,198 7 Reduction to net recoverable cost $ (149,290) (148,734) increase in general prices (283.448) [ Increase in general pnces in excess of increase in specific prices after the reduction to net recoverable cost (122,984) Gain from decline in purchasing power of net amounts owed 158.775 158.775 Net price level adjustment 5 9.485 35.79? i ~ (a) Includmg the reductwn to net recoverable cost. net income Goss) for 1981 would have been $(79,%1.000) m constant dotars and 5 (105.711.000) m L current cost dollars. (b) At December 31,1981, the current cost of property. plant and equipment net of accumulated depreciadon was 55.038,126.000 whr.e ongrna: (net recoverable) cost was 52.989.542.000. i !i Supplementary information concerning the effects of inflation As pressbed by Statement of Financial Accounting Cunent cost data differ from constaat dollar data h Standards No. 33, we have prepared information on the mainly because the pnces of assets have increased at rates l F effects of infiation on operations. The methods used to d.fferent from the rate of general inflation. compute this data are experimental and subject to change Revenues and Expenses by the Financial Accounting Standards Board. These data l do not reflect the " current value" of our assets. They do Revenues and expenses (except for depreciation) were ( not measure all the effects of inflation on our operatons or assumed to accumulate evenly throughout the year. No predict our future cash requirements.The effects described adjustments were made to the fgures reported in the c herein are not recognized for income tax or ratemaking primary financial statements. No adjustments were made to Federa! income tax expense. E purposes. l General Depreciation Historical costs adjusted for general inflation are referred to The constant dollar and current cost esumates of property L as " constant dollars" The original cost of utility plant and and plant were determined by applying the indres noted to I certain other items was converted to constant dollars by onginal cost. Restated depreciation reserves were used to F appluing the Consumer Price Index for All Urban Consumers e mpute property and plant net of depreciaton. They were to th'e cost of these assets. btained by applying cunent depreciaton rates by account p Current cost data reflects the cost of current replace-to restated property and plant figures by vintage year. The [ ment of exiging assets. The current cost of assets was depreciation provisions were obtained.by applying current N estimated by applying the Handy-Whitman Index of Public depreciation rates to the average of beg:nning and end-of-p Utihty Construction Costs to the original cost of structures year estimated depreciable property. ) C and equipment. Original cost of land was trended using the Materials and Supplies Consumer Price Index for All Urban Consumers. Certain Balance sNet items such as fuel in stock, matenals and p other property was trended to current cost using other supplies were treated as cash type items. Fuel inventory is mdustry hdices. g _ W'M eM 4 ~ '~ ^ huW kh ashderb M" -IM .nine Os w (We&24eh & .- wg m g

?} p The Cleveland Electric Illuminating Company and Subsidiaries riva-year comparison cf selected suppl:m:ntary financial data b adjusted for effects of changing prices (unauaitea)

y (Average 1981 DeLars) b' Year Ended December 31, 1981 1980 1979 1978 1977 (Thousands, except per share amounts)

Revenue i as reported $ 1,012,930 $893,566 5 824,267 $717,092 $659,290 .L in 1981 constant doDars $ 1,012,930 $986,254 $1,032,798 $999,671 $989,480 Net income t as reported-continuing operations $ 155,734 $125,383 $ 113,534 [ in 1981 constant dollars 5 69,329 $ 57,352 5 72,182 L in 1981 current cost dcDars 43,023 $ 26,808 5 38,154 Income (less) per Common Share I as reported-continuing operations 2.52 5 2.26 2.31 L in 1981 constant douars 5 0.72 0.62 5 1.05 j in 1981 current cost donars 3 0.17 (0.09) $ 0.16 t. Net Assets at Year End [. as reported $ 1,002,206 $912,731 S 820,411 [ at net recoverable cost S % 9,808 $%2,183 $ 972,075 f increase in general prices in excess of L increase in specific prices after reduction to net recoverable cost 5 122,984 $208,409 5 237,690 h Gain from decline in purchasing power of net amounts owed $ 158,775 $208,206 $ 222,056 j. Cash Dividends Declared per Common Share E ~ ;' as reported 5 2.08 2.00 1.92 5 1.84 5 1.76 in 1981 constant dollars 5 2.08 2.21 5 2.41 2.57 2.64 Market Price per Common Share at Year End as reported 5 16.00 $ 14.63 161'5 $ 16.88 $ 22.50 l in 1981 constant dollars 5 15.48 5 15.42 19.25 $ 22.66 5 32.93 r Average Consumer Price Index 272.4 246.8 217.4 195.4 181.5 i subject to rapid turnover. As such, we believe the onginal Effects of Inflation on the Company cost of this item fairly represents its current cost. Our 1981 revenues increased despite the decline in t.ntt Reduction to Net Recoverable Cost sales f electncity, but revenues in constant dollars remained a same as b pnor m h h h hn Under Ohio law, we can recover only what we paid for i rates W Meamg cost of he was ma4 e plant and equipment, so the values of these items under ds were reduced N i e r om o a s increased in 1981 on both t-t e low or 1 cost m un constant dollar and current cost bases. The differences increase in General Prices in Excess of increase in between these measures and income as reported occurs Specific Prices After Reduction to Net Recoverable Cost because we are not permitted to recover current cost The overall increase in prices of our property and plant measures of depreciation through rates. Ohio law restricts exceeded the increase in general prices as measured by the recovery of investment through depreciaton charges to the i i. Consumer Price Index for All Urban Consumers during origmal cost of plant. The part of current cost we couldn't 1981. However, when the current cost of plant was reduced recover was only partially offset by the gain from holding L to the lower original cost amount, this " gain" from specific cash type habilrties. price increases was more than offset. We have to raise new capital to meet growth needs at inflated costs of construction and to replace com out items i Gain from Dect'ne in Purchasing Power of Net at higher replacement costs. If rate adjustments fail to F Amounts Owed compensate for the cost of new capital, especally during , q. With inflation, holding cash type assets such as money and times of high infWion, a regular erosion of the retum on / receivables results in a loss in purchasing power. Holding equity will occur. As a result, there will be a regular need cash type habilities such as long-term debt results in a gain for rate relief. / in purchasing power. Preferred stock and deferred tax We continue to seek proper and timely rate increases balances were treated as cash type liabilities for this and a regulatory environment which is responsive to the L computation. 41 effects of inflation on our investors. V .n-w .a ....w.e - - ~ ~. - +~- - - - ~

h L2 L B oera er oirectors Principal orricers and Executives / V leigh Carter (56) Robert M. Ginn (58) President t.- Chairman, President and Chief Executive Officer of Richard A. Miller (55) Executive Vice President jP Tremco, Inc., manufacturer of specialty chemical Harold L. Williams (55) Executive Vee President pr cts and a wholly owned subsidiary of The B.F. Dalwyn R. Davidson (63)Vice President System Engineering & Construction M Robert M. Ginn (58) John W. Fenker (55)Vice President Power Supply ( President of the Company Robert J. Farling (45)Vice President Administrative Itoy H. Holdt (61) Services Chairman and Chief Executive Officer of White Frank A. Kender (54)Vice President Energy g Consolidated Industries, Inc., manufacturer of products Application Services q for the home, principally major appliances, and Edgar H. Maugans (47)Vice President-Finance J hn J. Misic (60)Vke President Distribution & Services h sd ' 0) ( Partner in the law firm of Squire, Sanders & Dempsey AI{nD right (52)Vice President-Public Affairs g Richard A. Miller (55) Clement T. loshing (58) Treasurer Executive Vice President of the Company g Karl H. Rudolph (67) Andrew R. Felmer (58) Secretary Chairman of the Executive Comtnittee and retired Chattman ar. i Chief Executve Officer of the Company Newton D. Flack (56) Division Manager Steam Power Division Craig R. Smith (56) a President of the Industrial Group of Bendix Corporation. The Industrial Group is a producer of machines and accessories for the metalworking industry. Also Chairman, President and Chief Executive Officer of T The Wamer & Swasey Company. a wholiy owned / subsidiary of Bendix Corporation Charles E. Spahr (68) Director of several companies and retired Chairman and Chief Executive Officer of The Standard Oil Company (Ohio), manufacturer of petroleum products, chemicals ^ and plastics and supplier of coal Herbert E. Strawbridge (64) c Chairman and Chief Executive Officer of The Higbee [ Company, a department store f Richard B. Tullis (68) Chairman of the Executive Committee and retired Chairman and Chief Executive Offeer of Harris t Corporation, manufacturer of communication and t i-information processing equipment l 9 Harold L. Williarns (55) i Executive Vice Presiden of the Company a V ( landcam nge i Ralph M. Besse i l { Chairman Emeritus of the Board of Directors l J Elmer L. Lindseth l F Chairman Ementus of the Board of Directors ( 42 h_.m. e c., a_.. u. <.m _,: w m__..... E a _.. . m _.

p t 4 t Committeeserineseeraeroirecier. 4 L Audit Committee The Audit Committee recommends Nominating Committee The Nominating Committee to the Board the firm of independent accountants to be recommends to the Board candidates to be nominated retained for the ensuing year and reviews the results for election as directors at the annual meeting and to 611 cf the independent accountants' examination of the any vacancies on the Board. When reviewing potential Company's financial statements and the audit practices candidates, the Committee considers suggestions made e employed by the accountants and the Company. The by share owners. Committee oversees the establishment and administra-R.H. Holdt (Chairman), L. Carter, J. Lansdale, Jr., tion by management of etfective intemal accounting K.H. Rudolph, C.R. Smith, C.E. Spahr, controts and an accounting system designed to produce H.E. Strawbridge, R.B. Tullis financial statements which present fairly the financial [ position of the Company. Planning Committee The Planning Committee was C.R. Smith (Chairman), C.E. Spahr, H.E. Strawbridge, f rmed in 1981 to advise and consult with management R.B. Tullis and the Board on long range strategic planning. Respon-sibilities of the Committee include recommending long-Compensation Committee The Compensation range objectives and the strategies, manpower and overall ) Committu reviews and approves the Company's corporate organization appropriate to meet those objectwes overall Compensation Plan, includtag the pension and R.M. Ginn (Chairman), L. Carter, R.A. Miller, t employee stock plans, and, in particular, fixes the R.B. Tullis H.L. Williams r:muneration of the Chairman (if any), President and all Vice Presidents. H.E. Strawbridge (Chairman), L. Carter, R.H. Holdt, C.R. Smith, C.E. Spahr, R.B. Tullis t Executive Committee The Executive Committee acts on behalf of the Board at times other than regular Board meetings when it is impracticable to call together the i entire Board. The Committee has the same authonty r.s the Board, except that it may not elect offeers (other than assistant secretaries and assistant treasurers), fill vacancies on the Board or on the Executive Committee i or authorize the issuance of first mortgage bonds. K.H. Rudolph (Chairman), L. Carter, R.M. Ginn, l C.E. Spahr l Finance Committee The Finance Committee reviews L cnd recommends long-range financial policies and objectives and specife actions to achieve those objectives. The Committee, acting for the Conipany as administrator of the Company's Pension Plan and Investment Program of the Employee Savings Plan, also reviews the invest-p ment performance of the pension fund trustee, other pension fund investment managers and the Employee i-Savings Plan trustee and establishes objectives for the investment of Pension Plan and Employee Savings Plan tssets. l R.A. Miller (Chairman), R.M. Ginn, R.H. Holdt, i' K.H. Rudolph, C.E. Spahr, R.B. Tullis l l V ~ l r [ .s, 43 C._. 4 n,. _.. ~. a m m,. --.a ~, a, A - lL~-------.--.-~~~--

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r 8 4 n r7 7 ,i OBC.O C SO2 p; "ys'"teo'ng Highlights 1981 1980 Change d Common Stock Earnings Per Shore Before Extraordinary Gain $2.77 S2.56 +21c 180 Af*er Extraordinary Gain 3.27 2.56 +71c Dividends Declared Per Share 2.30 2.20 +10c Operating Results (millions) s 20 Operating Revenues $442 S402 + 10% Operating Expenses 339 322 +6% Operating Income 103 80 +28% 60 Construction and Financing (millians) Construction Expenditures $199 S235 -15% Internally Generated Funds 44 22 + 100% 1972 1975 1978 1981 Extemal Financing 122 190 -36% Prico Range and Dividends Paid Per Share of Common Stock 1981 1980 nrst Second Third Fourth R:st Second Thzzd Fourth harter Quarter Quarter harter Quarter Qua:'er Quarter Quarter Price Range High 17% 18% 16% 17% 18% 20% 19% 18% Low 15% 15% 15% 15 15% 15% 17% 15 Dividends Paid * .55 .57 .57 .57 .55 .55 .55 .55 ~' Ihe dividend paid in January.1982 was increased to S.59 per share The Comrnon Stock is hsted on the New York Stock Exchange. These price gaotations are from The Wall Street Journal The nurnber of cornrnon stock shareholders as of Decernber 31.1981 and 1980 were 85.683 and 84.855 respectively. 9 About Toledo Edison The Toledo Edison Company is a tion of 750.000, the Company public utility whose primary acti. also provides relatively small i vities are the generation. trans. amounts of natural gas and mission, distribution and sale of steam heating services. Toledo electric energy in Toledo and Edison is owned by over ncrthwestem Ohio. Servicing 100,000 shareholders in all approximately 2.500 square states and in many countries miles with an estimated popula. throughout the world

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-_ x M i j b. 6 1 D II.h, R h,,:J.u Toledo Ohio: The Uncommon City Our 1981 Annual Report takes sibility to reverse that trend and Newcomers are impressed that somewhat of a departure from thus decided to locate our offices Toledo possesses the amenities of the considerations of past years. downtown.the heart of any a small city while maintaming the We've taken an enlightening urban crec. In addition. John P. high quality of services and oppor-look at the fabric of life in our Williamson, our chairman and tunities traditionally associated service crea-what our city is all chief executive officer. headed with big-city life. As a result of about, the people, the places. the the first redevelopment commit-this uncommon blend of socio-I pleasant peculiarities of our tee's efforts to promote similar logical extremes our business, social and cultural life. This nar-renewal along the downtown educational. medical and civic rative, complemented by on riverfront. It was our hope that leaders can function more effec-infrared photogreiphic portrait this bold commitment would be tively because of frequent inter-of the city, offers an uncommon viewed by others as an invita-personal contact. look at Toledo, Ohio, the tion for further development. For those of you who know the Uncommon City. Years later, with the newly com-Toledo crea we hope you enjoy The core of our company, pleted glass tower of Owens-this cross section of local life, Illinois, the new Toledo Trust downtown's 17 story Toledo included in this year's Annual Edison Plaza. serves as a building and other downtown Report. For our readers unfamil-physical reminder of our commit. construction activity underway, far with our service area, our ment to Toledo. Some 12 years along with the revitalization tribute to the city sr.ould under-that has taken root in Toledo's ago, when we were deliberating , core and explain our long-over the site for our new head. fine neighborhoods as well we standing commitment to this see that our investment was quarters building, downtown vibrant comer of Ohio. not in vain. ( iledo was in the threes of urban decline. We felt a respon-i 1

r ~~l T --r m ~ ~ rR RR'rG __O w. __ _ V _ _ _V. _ L ) It givN me great pleasure to plan. cithough final rules and p I: M repori that Toledo Edison expe-regulations have not been M @M ' _5 rienced a financially good year issued by the Intemal Revenue .gf.f I in 1981. Service. [$ Our 1981 earnings por share Our earnings increase was increased 71 cents to $327. from achieved despite a three per-WV C S2.56 in 1980. Major factors in this cent decrease in our kilowatt- "O'm 7 increase were the efficient per-hour sales last year. Industrial i. ' '.' formance of our generation sales especially were offected N system and an increase in our by a large drop in output at our rates effective in April. This local oil refineries due to includes an extraordinary gain decreased gasoline consumption of 50 cents per share, resulting lait year. Sales to motor vehicle from our innovative common manufacturers actually showed stock for bonds exchange in the a net increase for the year due fourth qucIter. to production work being shifted Common stock dividends were into our modem and efficient increased twice in 198L A two local auto plants'monufacturing cent per share increase was facilities. Residential sales were voted by the Board of Directors down. principally due to very in March followed by another mild summer and winter two cent increase in December. weather in 1981 clong with some This was the 17th dividend conservation e!! orts by our increase since we started our customers. Commercial sales for policy of periodic increases in 1981 remained fairly constant. 1962. The current dividend rate is Scles to municipals for resale now 59 cents per share. or E236 dropped 20 percent as they Davis Besse generated elec-per share on cn annuclized shifted their peak time summer tricity 67 percent of the time in basis. The company has now loads to other government 1981. almost double the 1980 total established a record of 60 sources freeing some of and the best record in its four-years or continuous dividend our low-cost capacity for our year operating history. To take payments own customer needs. advantage of its low nuclear fuel costs, the station was scheduled Two improvements in our divi-dond reinvestment plan should We maintained our net gener. so as to produce about 29 per-enhance the attractiveness of oting mix of 29 percent nuclear cent of our customer require-your Toledo Edison shares in 1982. and 71 percent coal based out. ments oven though it repre-

• A five percent discount to put. Our Davis Besse Nuclear sented only 25 percent of our Power Station accounted for a capacity mix. This translated shareowners on shares pur.

chased with reinvested divi. greater percentage of total gen. into a significant.iavings in fuel eration than ever before. costs for our customers of $39 nends will be given starting milli n in 1981. with the April payment. Completion ci cur current

• A new tax benefit for rein-generation expansion projects in Y

vested eamings is provided in the late 1980's will provide on e et n out o ce the Economic Recovery Tax Act economic capacity mix of 45 for its second refueling. About of 1981. From 1982 through 1985, percent nuclear and 50 percent one third of the fuel will be participants in qualified public coal-fired capacity. The remain-replaced and the remainder will utility dividend reinvestment der will be economical. limited-plans. including Toledo Edison's. usage peaking-type units. This eo od a more even will be permhted to reinvest up combination of low cost nuciear core configuration. The process is to S750 a year ($1500 on a fuel and highly e!!icient coal repeated every 12 months cur-joint retum)in dividends and generation should,in future defer paying any fede:al years, play a vital role in sustain-g d on c e by income tax on those dividends ing the financial viability of your 1985. Necessary inspection and until the shares are sold. We company and holding down our expect to formally qualify our prices to our customers. 2 u.

C maintenance tasks as well as was the first such transaction of investment in the same four units some additional required plant its type in the utility industry from its customers. modifications will be performed and is a credit to the creative Your Company was not a party during this year's outage. thinking of our financial to this ruling. but on intervenor in Fossil fuel generation provided management team. our 1981 rate case appealed to 71 percent of our customer Other innovative actions were the Commission for a reduction requirements in 1981. Bay Shore taken as a means of having in our rates as a result of the Station, still rated among the additional financial flexibility to Court's decision. The PUCO. in most efficient of all the hundreds meet changing future conditions October reaffirmed the icimess of fossil power plants in the in the securities markets. of our rates offer a hearing on nation produced half of the sys-In November, a Netherlands the appeal, noting that our cur-1:m output. And the new Bruce Antilles corporation was organ-rent rates would be justified even Mansfield coal units in westem ized as a wholly owned sub-without the concellation cost Pennsylvania. in which we have sidiary to serve as a financial recovery. The Commission also partial ownership, provided us corporation to raise longer term decided not to order an immedi-with another 14 percent. funds outside the Uruted States. ate write-off of our remaining Our coal-fired units are a This complements a " Eurodollar" investment in the four units and d:pendable source of electricity revolving line of credit that was deferred for future consideration for our customers and they are established in 1980 to facilitate the impact of the Ohio Supreme also a testament to our commit. mis entry into the European long. Court decision. ment to maintaining the clean term capital markets as well as We at Toledo Edison are confi-cnvironment of the Toledo creo. to provide greater availability dent that the economic condi-e have completed investing of short term credit. tions will improve in 1982. Our 4326 million in environmental Two-thirds of our 1981 construe. task of managing the company improvements at all cool-fired tion expenditures were !ct our efficiently during these times was facilities over a six year period. share of three nuclear units made possible only because of As a result, our generating being built by the Central Area our talented and industrious stations are now among the most Power Coordination Group. team of officers. managers and environmentally acceptable These units are scheduled to add employees. We truly appreciate operating in the country. Our 646,000 kilowatts to our system their efforts. sulfur dioxide emissions are by 1988. Our construction invest-We also extend our thanks to tha lowest of any electric utility ment of S199 million in 1981 you, our extremely supportive in Ohio. reflected a reduction for a sec-stockholders. for your dedication The company negotiated ond consecutive year. and loyalty. Rest assured that our financing in 1981 that should We must depend on rate management team is doing its prove very beneficial in the long increases for the eamings utmost to augment your invest-1:rm. A significant move was the necessary to attract financing for ments and justify your continued exchange of new shares of com-these projects. We were granted confidence in Toledo Edison. mon stock for some previously an 18 percent rate increase in Cordially. outstanding company bonds. 1981 and have requested an 11 The bonds were reacquired from percent increcsa for 1982. a brokerage firm at a price As part of the April 1981 rate about 40 percent below their increase. The Public Utilities Com-face value. The exchange pro-mission of Ohio approved recov-vided a higher value for the ery, over a ten year period. of John P. Wilhomson stock issue while also improving the Company's $47 million share Chairm and Chief Executwe Omcer the ratio of the equity portion to of the $240 million already spent tho debt portion of our capital on four terminated CAPCO gen-structure. Because of cccounting erotion projects. However in July. ( 9quirements. this exchange 1981 the Ohio Supreme Cc urt. In a . esulted in an extraordinary split decision ruled that the Wendell A. ohnson. credit of 50 cents per share in PUCO had exceeded its Ohio President and Chief Operating Omcer our 1981 eamings. We believe this statutory authority by allowing another Ohio utility to recover its 3

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.,y. Y W ..t=5 . rm en, . y,4,'a y< s.n g g :n t ~ Toledo prides itself on fine residential neighborhoods proxirnate to a wealth of civic. educational and cultural institutions Toledo Edison is proud of its posi-More importantly. Toledo Edison n pDr): c tion as a leader in the life of the has done for Northwest Ohio ,,7 Toledo metropolitan crea. For who only a forward-looking l decades the company has been power company can do-one of Toledo's major employers. provide a dependable supply of and its employees have main-electrical power to the district's tained a trad! tic.. o: public serv-homes. businesses and industries, f-U" ice cimed at impic71ng the Q The history of Toledo is the story quality of life in their city. Toledo i the Maumee River and the "g.:S Edison people have been activ'e Great Inkes. but modem life in urban redevelopment the arts. demands more than geographic g the United Way and nearly advantage. It requires stable, every other aspect of the com-munity's existence. Beyond that. progressive citizens who under-stand the challenges of tomor-the company itself has been a row while venerating the pioneer in the redevelopment inshtions of the past. of the Toledo city center. The foremost culturalinnitution 4-Working in concert with public in Northwest Ohio is the Toledo and private agencies. Toledo Museum Of Art.The stunning Edison has acknowledged its neoclassic stmeture houses one I corporate responsibity to be a of the nation s most diverse col-l good neighbor. We have shared lections. Art dating to ancient l in h hist civilizations finds a home there Sculpture of naturalist John Burroughs tre es he city w e sup. within more than eight acres of nation's oustandMg concert halla porting exciting new facilities that beautify the area, and act floor space along with some of Tours and classes at the museum, the best contemporary works. in conjunction with city schools j as catalysts for modemization. Toledo is world famous as The and the University of Toledo. l Glass City and the 5.OOO-piece reach thousands of Toledoans l display in the Toledo Museum of each year from pre school age --) Art chronicles *he city's heritage to senior citizens. Since its found.. as the pre-eminent producer of ing in 1901 the museum has had industrial and artistic glass. The more than 19 million visitors. museum's Peristyle is one of the 4

T-e -n k _O v _ _ v _ _\\ / ation. These organizations bring the best in music to city dwellers. suburbanites and visitors alike, performing at the Museum of Art i Peristyle, the Masonic Auditorium and at the zoo amphitheatre dur-ing warm weather. Symphony musicians also visit senior citizen i centers, schools and hospitals l throughout the district. Zoos are ger.erally considered to j be recreational facihties, but one I AI as fine as Toledo's deserves to be listed as a cultural asset to North-p- west Ohio. It's hard to guess what rt 9[7 a e. 4,~f-'rj, 0 the animals think, but most 4 rgja - v, - humans recognize the Toledo _th M.185 Zoo as one of the 10 best in the 4..,v 2g z.% g::f"5E;h5 ~,hD..f6 G D.9 ~7g 2 J.6 United States. Like much of the l Museum visitors view Rubens' Crowning of St Cathenne.- metropohtan crea it serves the Toledo Zoo is a happy blend of the old and the new.The fine amphitheater and sohd display (h, halls date tc the 1930s and pro-vide outstanding facihties in the ~ old-time zoo style. Grafted onto the central Zoo are brilliantly conceived new facihties hke s the Rare Mammal Building. j The Zoo is one of Toledo's oldest and most successful tourist attrac- ~ l tions. It is open 364 days a year. .~ l with Christmas being the i ,X. .c j animals' only hohday. Toledoans J ~ ki , h as well as visitors take advan- ~ tage of its charms, and last year k more than 850.000 people ?- crowded through its tumstiles. .+ From high culture to pop culture i to fun culture. Toledo offers its _a O residents a full range of institu-i d l ..6~ tions that compares favorably The Owens-Illinois Building (background) heralds the city's Glass Capital role. with s,ome of America's largest cities, yet it holds all of those The Toledo Lucas County Pubhc operates through branch offices cultural benefits within easy Library is in the heart of the and bookmobiles to offer the reach of Northwest Ohio's three-downtown crea at Michigan institution's riches to all of quarters of a million residents. Street and Madison Avenue. Lucas County's residents. It features a striking art dec . iriterior and wide ranging collec-One cannot survey the plentiful culturallife of Toledo without ( ans. The library. 0pened to the appreciating the work of the public in 1940,is headquarters Symphony Orchestra, the Con-for a county wide system that cert Band and the Opera Associ-5 i

l I r r,e -- - co - o- ..) v.... l While theWest Side is the comer-stone of Toledo's urban sophisti-cation. East Toledo is home for some of the city's most secure and traditional residential districts. East Toledo features small, sensible homes that i l sprang up around the industrial facilities where their builders eamed their wages. That hasn't d changed much in the last cen-

1 tury, as East Toledoans comprise many of the skilled workers who operate the tools and controls at the city's plants and factories.

The suburban Village of Ottawa Hills offers a gracious lifestyle within easy commuting, distance of the downtown district. Homes l that range from tastefully ,,,,,.,u modem to pumly elegant grace its parklike environs. Some 30.000 people reside in Syl- ' M W T.,,,h-l _;w7 g~m. .,^ ^' 'd%.rJ7:: : ' vania Township and the City of

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ping, medical care and travel to Qd.M c g,y. the city. r.m.f; The Old West End of Toledo is one of the best residential "8N expressions of the cny's spirit of renewal. Fine old homes dating to the tum of the century which might have fallen into disrepair .ia and become nuisances are being bought and restored or .5 remodeled for siylbh modern housing. The Old West End offers American Gothic homes bring small town New England reminiscences its residents a brisk walk or a Across the river and south city's executives choose to live in i short transit hop to major office of town. Perrysburg is one of ofaumee because of its historic buildings along Summit Street at I Northwest Ohio's most historic elegance and quiet residential the river's edge. locations and one of its best resi-style. dential sections. Although less Supporting these and dozens than 20 minutes from downtown, cf other residential communities the Perrysburg crea boasts is a comprehensive network of charming homes and shops that shopping malls that range from seem centuries removed-rather quaint town malls to the giant than a few miles distant-from shopping complexes that sur-round the city. The district also v) the bustle of commerce down-town. Another popular riverside boasts several one-of-a kind I city is Maumee, southwest of shopping facilities. downtown Toledo. Many of the 6 l

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The Toledo market crea com- .t.,.. y ' '[. s y . T-M r" vi - i [. DW ( ' ? ',', p " g[g?" ;5 W.g-j,;qf"g., } f prises the counties of Lucas, chf. i ~ '.J g.. Fulton, Ottawa and Wood in b 'I Ohio, and Montoe County across .. g,.; n ',p-l,gp 't;h 4 ', h,'.f the state line in Michigan. Most ~ 4.- .C ['s h . .l g"c ff: ..p'g.UD'k,&-k, b ~ Gg 1.) .J,. r." 'ep.'%Y.i e recent census figures show a .3 & ' '( i f.l - total population of 781.600 in ~j i . '.i 8 Te c ,r ' 'A 276370 households. Total annual 4 g.. g' retail sales within the crea . 2. #[.4, j amount to nearly S3 billion. i[g p ?. f,- [. 3I..'b I / Estimated consumer spendable l income for the five-county region I is S5.8 billion a year. Median i ,i ~ family income ranks eighth in i (K, f[ i ' ? I the nation. Census figures show j.H that more than 71 percent of the ~y families in the five-county crea l[he%-1 MEdhggg /- own their own homes. A key part of the quality of life in the Toledo crea is the availabil-ity of the Metropark system.This network of nine outdoor facilities ( f% -.. - - spanning some 6.000 acres around the metropolitan crea .. P. puts the great outdoors within ~.. easy reach of most city residents. Modern suburban neighborhoods oter a gracious lifestyle-To single out an examp'.e, few parks anywhere can ccmpare ' 5 09-e '.* q e" I$$Yke~jP,y'6 h)(. with the Side Cut Metropark south of town along the banks (. f ; -) - 's of the Maumee. Another asset to the park system is typified by i - ' $ kg . M .. y Fort Meigs State Memorial Park-i~ . p -i.- a restored riverfront fortress ,f',J dating to the War of 1812 3 ',i * (.. In all. more than 100 parks ~I ranging from neighborhood ' EA, .a p;cygrounds to huge state =' fccilities are available to ,>a Toledoans. providing wholesome outdoor recreation for the city's ~- hard-working business ond w indu'strial employees children and serdor citizens. i' lb ( sam-srchitectural diversity is shown by English Quiet. iree'hned streets typify the close in Tudor horne. residential areas l 7 l

l h ~ ~ ~ ~ i r-T m ~m mm mm ~m ), v____ ______.____v.___ i The educational world in Toledo is synonymous with the Univer-i sity of Toledo. The state-operated institution occupies two ccm-i puses on the city's West Side and reaches more than 17.000 students annually. The wide ~ scope of course offerings makes ( l 11 an attractive choice for local 4 Y ' f f. f y "[Y g students who wish to continue their education without leaving g a home or assuming the crushing 'f debts that often accompany col-g*? u l-lege life. Course work leading to ~ y baccalaureate and graduate l degrees is offered at the Main

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in technical studies. More than i;; 54.000 degrees have been con- . g 7' ; m ferred by the university during ,.g.3, its llO year history. ~.., y< g / 5 't ) The campuses are centrally .g y located within the metropolitan a. i m area. a situation greatly appre- .L ' ' ~" ciated by commuting students (i { i a and the thousands of children pV i and adults who take advantage

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w of the university's enrichment f;.yd 1~p/ J M 3s ~'wu,, g classes and cultural and research facilities. Despite its size f' g - 'y 4,., and student capacity, the Univer-relatively compact, snuggled ~ .T Ff - sity of Toledo's main campus is r-within a ten-by-six block area ~ ~ ~ that contains major facilities like "PE-the Glass Bowl Stadium. Centen-nial Hall arena and University Hall, but stillincintains wide ._.e_ green spaces and substantial i wooded areas. The campus is a ' ~ ~. ~ jaunty, congruent blend of The Univemty Hall Tower-a dorrdnant landmark on the Univemty of Toiedo campus Go' hic mchitecture reaching tution is Bowling Green State of' Toledo is the University ot from University Hall's tower to the University,15 miles southwest of Michigan at Ann Arbor. A great Carlson Library Law School and the city near Interstate 75. Bowl-educational complex. it is also Dana Engineering Science ing Green is situated on a the scene each fall of outstand-Building. 12OO-acre campus that is home ing football games in its The Toledo district's wcond for more than 15.000 students. lO6.OOO seat stadium-one of major general educationalinsti-The University offers comprehen-the largest in the country. sive curricula for bachelors. Among the dozens of other col- ) masters and doctual degrees. leges, universities and technical'" Withing an hours drive by schools within Toledo Edison's interstate highways to the north service area, some of the most 8

l .I--Q Am n (._ _L ) _ _L 1 I prominent are Wayne State and the University of Detroit. both in l Detroit, and Defiance College, g-l l 50 miles southwest of Toledo. .. ~ + Residents of Northwest Ohio g. ' ' ' '].E'w~ i e. 1 i

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+f i.. depend heavily on these and i_ ~ ~ ucte work, adult enrichment pro-T - l' g ". I other institutions for undergrad-4 t ? e. ) 6 s,q ' ' ~, i grams. advanced degrees and a -... _- N ' wealth of research. cultural and MMM M " ' N y +*c, p p,.py g j. P- {, __.j entertainment pursuits. institutions of leaming is the -..M I T '. r- - p* j The newest of all Toledo's I Medical College of Ohio at ~4'-'- '. 4 V b ~f ~hI To!edo. Incorporated in 1972. = the schoolis visually stu: ming ~ and academically excellent. ,, 2 $. j Graduate training is offered in 16 ...f i medical specialties. More than Rower Hospitalin Sylvania. 700 medical doctors have graduated since MCO was pq cadre of engineers physicists. founded. The medical college is 1-theoreticians. biologists and j i major element in the outstand. Z%.,. management specialists-to r~ name just a few-to maintain our dig system of health care with which Toledo is particularly constant flow of clean power blessed. In addition to the and a healthful environment. college there are eight other To meet that objective. Toledo hospitals to provide for residents' }. Edison works cooperatively with I health needs. They include the Ohio State University and the l Toledo Hospital the district's crea's own universities and I largest with nearly 800 beds technical schools in work study J St. Vincent Hospital and Medical programs, tours. and research to Sylvania. Riverside HospitcL community that dedication to ~ Center, Flower Hospital in help buttress within our student Mercy Hospital: St. Charles technical expertise and ecolog-Hospital St. Luke's Hospital and ical sensitivity we have chosen Parkview Hospital-Osteopathic. as our guiding philosophy. The For a city the size of Toledo. company even opercies its own continuing education program such a wide variety of medical f r Toledo Edison employees at facilities is remarkable. Special-ergy hecton Cener d i ized medical techniques nor-Davis Besse. Instrucic;s from Chio mally associated only with large The Medical College of Ohio-State University teach classes at cities-such as open-heart sur-gery, critical bum care, the Life tom graduating classes at local the center for both degree and Flight helicopter service and institutions. especially in techni-non degree work. primarily in regional emergency medical col disciplines. to help mcintain technical studies. The progicm ambulance service-cre avail. our high level of dependcL111ty benefits Toledo Edison employ-ees at alllevels within the com-able locally to Toledoans. in power generation and to bolster our commitment to p ny to expand their education Toledo Edison is excited to be environmental protection and and skills for personc! enrich-part of the city's educational quality of life. In recent years ment and job advancement. ( community. We actively recruit with the addition of our Davis-Besse Nuclear Power Station. an even greater need has developed for a dependable 9 .:=

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4 a. -w.. to Toledo's big-time status is the 3 presence of seven of the nation's o. '-@ -,Iw . pg[ " I-3.C-1 + largest industrial corporations -) ,[j '1f' f .]' j c y i? w . v,W ' M. ec,WQ Y. ' " ~ N with home offices in the Toledo .J -.o { jM$' ?..- 'S%h ' O N n crea. They are Owenslllinois Inc, Owens-Coming Fiberglas Corp, yi 7 i ~. ' - T 4-4., ' Libbey-Owens-Ford Co, Sheller- ., A .g/h.7 ,4 j# M ' 7 Globe Corp, Questor Corp Dana l .3. -

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Corp, and Champion Spark Plug Q ' *- '" Y,,!j ' j:p i +. . - ?g.9 .J.. -A % W. y g 1 Co. The city historically wa., a .7 4;-f(-g.4 ,1 4 ;..... little sister to Detroit and the auto k* 4 %g.4 7,,, 3. industry, but modem times have ,, -F.dellpf(.f1j./.%F V; f .e,.,...%'.~ . -V %q, 5 seen Toledo's industrial giants diversifying and specializing to ' 4, 4,, bh W", v7' economic well-being no longer .2 E M. ~,NU B-4 - 7 such an extent that the city's gf. - 4 i E- :. L.. { 4 1 ' - db '1 ' < - R is directly dependent on that of r the Motor City. M ' ' %.[ F, . a I fj' J- .g'-- ~ ~ b('.^ j. - ' ' ;s Toledo remains the nation's largest manufacturing center for I f.'..', 4 ,4 J '" W automotive parts, but slie also is a f-M'.,.E' - ..c-g- the glass capital of the world. y - 1,' ..',,. ;.<(U St[.. ' ,1' ) -;(" ir. She is a leader in production of s spray painting equipment and y '~ food processing. p (,. , *~ ~ /M f* f c.7 f ~l The glass industry is Toledo's s 'a ' special asset. As electric power A f' '.ih.,92 /, @#4"',g ? takes on more and more of the t M ' j."E ; industrial functions once served

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'. g~ '. N by coal and natural gas. Toledo <3., Edison is assuming an ever-1 j., f _,. %. p. larger role in the vitality of the n.,. 4.. )' ' 2 c. .#e 'v. b' glass business which affects the ', M.- .,J f.Q$ j-4 ~ M building and transportation ~ 1'- ? ~ A/ * '*i Pe ' ' 'J, 'h*4 p industries at all levels. From the m electricity that powers an arc '7 ' ~ - ' y. e fumace to melt sand to the a.J

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' ~ f, k ,r ~ j. W, s. ., g The new Toledo Trust Buildmg. o sign of downtown's renewal. security clarm at the glass fac-Tlie American auto industry is tories' loading docks. Toledo headquartered in Detroit, just Edison is behind the glass indus-50 miles away, but the rugged, i try. Our innovations, like the con-popular Jeep is manufactured tinually improving operation of in Toledo. This district also is the Davis Besse power station. the home of the automotive help us to bolster the investments parts industry that keeps the glass companies have made America's cars running. ') in cur city. 10

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- Uf 4 ,_Jfw-d Q m, l ~. - ~ 2, e. ~ .=.' 7 r .. + y,. u. t j y, -m. ], N.,t, ' Q P* i 1 --n. v., C *., Modern industnal pmks are designed to blend with surrounding residential areas f l Toledo Edison takes satisfaction in our ability to do the ditticult ry but essential work of business i ~ while preserving the natural l beauty of our land. water and air. Our pollution control and -%..g.g; .;:-+' m.W.. g 4y i@aj. waste disposal systems are ,1 f. ([ %K'" *'ge' f (#* among the very best in the I .,~.% ?.72 indusev. When our Davis Besse 7 w m -- l M@y& ". ~ care not only to develop a safe, .T pp,we,, nuclect plant was built we took ~ Md -.E " clean generating facility, we i took the extra step of assuring that the land around the station would continue as a wildlife refuge. It is a source of pride to the Toledo business community that we and our industrial neighbors have been eager to do more than is necessary to [ maintain our quality of life. 1 Toledo is the home of seven Fortune 500 companies i ii

m ~m mm ~mm n .v v.... v ...v _ I Toledo can rightly claim to 1 j l be an ideal size. She is small i } I enough to offer her inhabitants I i easy access to all sectors of the i ) ',l ' ) l metropolitan area. Heally situ-j ated for travel throughout the i l Midwestem United States and 1 { / j l Canada, and large enough to i / j afford the sophistication. tempo. I culture and progress that only a I ) e. / major city can contain. Her I l .I - /, i i / p I medical, cultural and residential b ./ e offerings are first rate. The Toledo l I Express Airport is within minutes ! 7 '?' of the downtown district. and Detroit Metro Airport is just i an hour away. "f The Toledo district is unique in its d blend of heavy industry, business , - Q' [ + and agriculture. The Maumee fJ River provides not only on ideal ') f cultural goods to the Great ./[',#, '7 water supply for forming, but a natural conduit to ship agri-1 f' e Tf'. f Lakes-and from there all over 6[' 'j the world. That happy balance f f, 'f remains today, as Toledo enjoys / /. * ,e., ,[M T the unusual benefit of serving as // a center for industry, shipping ./- .Ah and farming The Port of Toledo 7

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f is the third largest on the f Great Lakes. 1- \\ Y Com is the lead.ng agricultural V, ' j '- product, followed by soybean f.4' and wheat. During 1980.160 / million bushels of these products p j. J r *J e f were shipped from the port. That grain that traveled from the ~; ,,f i ' ,/ j accounts for 4.5 million tons of e k, ,q r I y'l ; Maumee River to Lake Erie. ,/ e i One need only view the colossal .t,' I I grain facility operated by The .~

• i Andersons upriver on the g

/ / - N. i /.'/ ' / Maumee to realize that agri- / l culture is big business too. Man-made mountains of grain pass 'r'. l '< ge through the facility enroute to a food processors worldwide. That f / ./ grain comes in from throughout Northwest Ohio and helps feed ) g# ,, h k (-) the world. Toledo Ed: son Plaza (background) blends the new with the r>ld. 12 vrt-Wmv--- yw y -e,-w-y- - - --.,, ,., w w,,- ,__-,-_--...y-

-Q gmAn ....k ) v. G. _ ...\\ s The Port of Toledo also ships coal. . =. m. .g c 2 Iron ore, dry bulk and petroleum 7+- .L '. ~.y: .,1 79'.Yg, products. Toledo is the largest ' k x; %w... _, ju 2- ",/c g-, 7 g.5 W; betweei. Chicago and the East petroleum refining center ? ki.- '4: [." y. k% 7 Coast. During 1980. more than ., I JQ*'*$ I 0 ~ i'- 600.000 tons of petroleum l O ...l g-,b C n - Q._. [ %,W-j

1. y derivatives departed from y

. c 9,4 g i 3 - lup t: the port. f .h .n r :.3 /ll .c ? l' 4.. :'d ' rig We at Toledo Edison take special a - 3

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. t.( .F the essential function we fill in .? .I F.. j - ;y - J 4'- 1.s % l.., "l l@lb, @ *gp g, helping our business neighbors C um w.,n ? e / l... v. follow suit. It was Toledo Edison ig i power that helped build the .e 9.v .M : 9'. .y -1 city's new office centers, and it 'ie 4

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a. will be our power on which they Q . e g . di operate in the future. Our elec- ,c. a ) l

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5../'=J, 4 tricity will power the sensitive

. p. 4 ; : p.. J, ' - testing equipment and labora-i , The Andersons' grain facility, part of the area's growing ognbunness tory machinery on which our ( future doctors are being trained

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.,s.- 'Q k. at the Medical College. Our f., pg;-1. 2' 1, " - .q 7 g power will operate the tele-j 1 c4 .i ^ .J"F,.g. phones. cash registers, computers l 4.~ 4 and conveyor belts on which all g -. - 1, g. p -,*.." 1 -.: ;(. community depends. When a . I. ;g 5 ..y g., 7. M ..-- v of Northwest Unio's business j D '*. - ~ [.; } 4 @]7 i .y w .,.4 og,. j,;. residential contractor sands a i,..~ , _.QM gp. g,r,,,..g floor in De!!ance. Toledo Edison r i '*t will be behind him. Our elec-i [~ ~ ( ~-<.jj N ? l 4 ^.g g ~ ' ky." i ... k@ g, f, . di..fc.< ( '. tricity will light the streets t 'g, y ;4,. 3..; f,, <, residents safe. of the district and help keep ~., j - 1.- "/ T >. f

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7:3 From private homes to small j

s g' (. pg.- 7. . e ,.b '.2 3, restaurants and refineries we are ,4.' '+ businesses to schools. hospitals. l y. .? '. .' / proud of the work Toledo Edison i < a ',,Qg :, .i. ~ and its people have done in l g meeting the demands and antic-i ..,qw v,, ipoting the future needs of North-i gg ' s.;..? m., *. ,. i ', *l west Ohio for reliable electrical i

1

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3 j,. gp y ',,.. neighbor. We are gratified with ).% G9;14 g. %.? gg'.,. g:...QYl r " 'gJ,'MY ; '(. ~ " ~ r '. the.cy we have been able to

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.m 1., 3 ~ perform an uncommon Job for i 2- . < +.y' c.,. ,M w ..f j;, 3 9 a '+ - the Uncommon City-Toledo. &m.).-

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. w wm v I O.- i t The Port of Toledo is the third largest on the Great 1/2kes 13

i Management's Discussirn and Analysis I of Results of Operations anci Financial Condition i } i The Company continued an uninterrupted period, of the cost of the four cancelled units. I common stock dividend record in 1981 This amounted to an amortization expense of I extending 60 years, from 1922 to the present. S3.3 million in 1981. I - In March 1981, the dividend was increased In July,1981. the Ohio Supreme Court n.!ed that i from 55 cents to 57 cents per share. The rate the PUCO had exceeded its Ohio statutory l was increased again in December to 59 cents authority by allowir.g another Ohio utility to per share. These dividend increases are in recover its investment in the same four units keeping with our policy of regular increases for from its customers. Our Company was not a t our shareownels in an effort to help offset the party to this ruling. In late January.1982, the j impact of inflation on your investment. For United States Supreme Court dochned to federal income tax purposes, the Company review the Ohio couri's decision. e estimates that 45.9% of the 1981 common stock dividends will be considered a retum of The Company's current electric rates were capital. found to be reasonable by the PUCO follow-n cto k G, M M W N G m h OPERATING RESUL'IS IMPROVED IN 1981 stors was ac. ting in response to an intervenor's Eamings per share increased in 1981 as a appeal to the 'rUCO for a reduction in our rates result of good operating performance and the as a result of the Court's decision in the otner settlement of outstanding insurance and tax utility's case. The Commission concluded that htigation combined with an extraordinary gain the Company's rates were in all respects late in the year. Eamings increased to $2.77 per reasonable and should not be reduced. The share before the gain and S3.27 after the PUCO clso decided not to order the Company extraordinary gain as compared to S2.56 into an immediate write-off of its remaining in 1980 and S2.65 in 1979. investment in the four units cancelled in 1980 and deferred consideration of the impact of the i Despite the continuing recession in our service Ohio Supreme Court decision until the Com-I crea,1981 was overall a better eamings year pony's new rate case, described below. The for the Company than the previous two years. Companys unamortized share of the costs y i 1981 eamings increased due to higher rates incurred to date in the uruts is about S43 I and revenues. the good performance of the million which could result in an estimated net-t Davis Besse Nuclear Power Station throughout of tax reduction to ecmings of about 027 the year. profits from substantial power sales to milhon in the year of the write-off. The ultimate neighboring utihties, the effects of tight cost effect of the Ohio Supreme Court decision on I controls, a non recurring receipt of S4.8 milhon the construction of future generating units. on of insurance proceeds. and a non recumng financing plans. and on Ohio regulation reversal of $3.6 million of Pennsylvania gross generally,is not determinable at this time. receipts taxes. The Company has experienced annuct Application for an additional rate increase I increases in total operating revenues during of about 11 percent, to yield S48 million { the last three years. The increase in 1981 over annually, was filed with the PUCO on August i 1980 is primarily due to increases in rates. 21,1981. A final decision by the Commission partially offset by decreased fuel recovery can be expected sometime in the spring of i revenues and a 3 percent decrease in kilowatt. 1982 based upon the usual processing time. The rate increase is needed to offset continued j hour sales. inflationary increases in our operating The Company's July 1980 rate increase expenses and financing costs, the costs of com-request was granted in April 1981 by The plying with environmental regulations, and the Public Utihties Commission of Ohio (PUCO) higher risk factor to our investors as a result of affecting retail electric customers. The incroase the Ohio Supreme Court decision. was the full amount of an 18.3 percent request The second step of an increase in wholesale and yielded S64.5 million annually in codi. tional revenue. As part of this rate increase, the electric rates. apphed to 14 municipal systems and one rural electric co-operative. wert into I i PtiCO also approved recovery, over a ten-year effect on April 1,1981. The Federal Energy l period. of the Company's share of the costs ( incurred in the four generating units terminated I A by the Central Area Power Coordination Group (CAPCO). Concurrent with the rate increase in )' April, the Company commencod the write-off, 4 against current eamings over a ten year I; 14 i

[ Lpr.I Regulatory CommNion authorized the Com-Nuclear Power Supplied 29% p pony to place the first step cf the increase into of Generationin1981 ( effect on October 1,1980. The two-step increase 30% [g Melded S6.2 million annually in additional avenue. g-I A request for an increase in rates for natural gas service in the communities of Defiance 15 and Delta was approved by both communities cn November 3,1981 and went into effect December 4,1981. It will produce S209.000 of additional revenue on on annual basis. -] Total kilowatthour sales declined during the 0 past two years primarily due to lower sales to 1977 1979 1981 industrial customers. In 1981, sales to residential customers and certain municipalites that resell Because of increased efficiency at Company 2 clectricity to their own customers also declined. generating stations, for the fourth consecutive Lower industrial sales have been the direct year the Company's dependence on pur-result of reduced industrial activity throughout chased power diminished. In 1981 the Com-the Company's service creo. particularly in the pony achieved adequate generating capacity automotive, glassmaking and petroleum refin. on its own system, and therefore was not a ing industries. The residential sales decrease in party to any firm purchase commitments. In 1981 was primarily due to milder weather addition. the added generation allowed us to experienced throughout the past year and sell power to neighboring utilities. Purchased continued customer conservation. The 1981 and net interchanged powe: expense (which decline in wholesale sales reflected purchases includes the sales of temporary cnd economy of power from a rural electric cooperative power to neighboring utilities) decreased by group by our municipal customers. S46 million in 1981. helping to offset increases Fuel expense increased in 1981 due to higher cool prices and additional generation from Purchased and Net Interchanged Company-owned generating stations in place Power Costs Reduced Again in 1981 3 l' f higher cost purchased power. The price of 100 "" I D " I coal the Company used to generate electricity continued to increase. Howevet increased low-f cost nuclear generation helped to hold total [ fuel costs down in 1981. 50 l The efficient operation of Company-owned } g:nerating stations, particularly Bay Shore, Davis-Besse Unit No.1 and B uce Mansfield Unit 5 No. 3 contJibuted to the overallimproved \\ l operating performance of the Company in 0 1981. Bay Shore Station contributed approx-imately 51 percent of the Company's total g:neration and continued to be recognized as 1977 1979 1981 one of the most efficient generating stations in the nation in terms of heat rate. The Davis-Deferred fuel cost accounting was adopted Besse nuclear unit showed a substantial in August 1981 with the implementation of new improvement over 1980. generating electricity fuel recovery provisions due to a change in 67 percent of the time and supplying approx-Ohio law. The Company is now collecting fuel imately 29 percent of the Company's total cost charges from customers based upon an g:neration. In 1981. the Company received estimated fuel factor per kilowatthout that 608 million killowatthours from its approximate remains constant (under normal circum-20% ownership interest in the Bruce Mansfield stances) over a six month period rather than coal-fired unit, during the unirs first full year of changing on a monthly basis Accordingly to l commercial operation. better match our expenses with our fuel cost d billings to customers, we are deferring fuel cost variances from the billing factor into the subse-k quent period in which the increased. or ,l ! k i. decreased. revenues occur. At December 31, 1981, the advanced recovery balance was $4.1 million. 1 15 N tw n a.m

l rI q. l 'l In th) Janumy.1981 PUCO Opinion and Ord r I;tumed to our customtrs through tha fusi on Fuel Adg.;tment Clause Matters, the Com-adjustment clause. The remaining S3.6 million l pony was ordered not to include the cost of was recognized as other income in 1981. Net a coal purchased from Quarto Mining Company of federalincome tetxes, the settlements T (Quarto)in the fuel adjustment clause at more increased eamings by $1.9 million, or about than generally prevaihng market prices 9 cents per share. 1, without prior Commission approval. The Com-Increased interest and preferred dividend pony is presently deferring the excess costs requirements and c grector number of com-over market price. At December 31,1981. the mon shares outstanding have impacted ecm-total of these cost deferrals to date was $9.4 p ings per share during recent years. A subston-milhon (see Note 7 for further discussion tici amount of these financinq costs. including g of Qumto). i F a retum on equity funds used, have been [ The cost of operating and maintaining Com-capitalized through the allowance for funds pany facilities has increased during recent used during constru:. tion (AFUDC) which I years, reflecting the impact of inflation and increased in 1980 cud 1981 due to higher l regulatory mandated expenses. Inflation has construction work in progress balances and p increased the cost of labor and materials. In increases in the AFUDC rate. addition increased expenses have been An extraordinary gain of $10.8 million i incurred on projects mandated by the Nuclear in November 1981 resulted from the exchange Regulatory Commissiort The effects of inflation with a brokerage firm of new common shares on the Company's operations are discussed for some of our first mortgage bonds previously further in Note 13 to the financial statements, purchased by the brokerage firm at a discount Depreciation expense increased substantially and traded to us at the lowered prices. The in 1981 due to increases in the level of Company exchanged 946.293 shares of com-deprecichle plant assets and the unit-of-mon stock, representing S15.2 million, with the production depreciation method applied to the brokerage firm for $25.6 million faces value of 1 Davis Besse nuclear unit. Under the unit-of-bonds. The dt!!erence between the face value [ production method, the Company accrues of the bonds plus accrued interest and the l depreciation for this unit in direct proportion value of the new common shares represented j_ to the unit's actual output each month. an extraordinary gain which was treated as a n daxcNe gain to us. ,) State and local taxes increased primarily due to a change from 4 to 5 percent in the state 5.fQUIDITY AND CAPITAL RESOURCES NEEDED excise tax rate in 1981 and increased property TO FUND CONSTRUCTION j taxes resulting from increases in plant assets. As a public utility, the liquidity and capital A settlement of Pennsylvanic gross receipts resources of the Company are influenced most i taxes contributed Si.9 million (after federal significantly by cons. action required to pro-income taxes) to other income in 1981. This set-vide the environmentally acceptable facilities tiement, which was S3.6 milhon before federal needed to meet the anticipated energy needs income taxes. resulted from the Company's of customers. Frequent and extensive use of the participation with other utilities '.n challenging capital markets is necessary to finance con-the constitutionality of gross receipts taxes struction and retire senior securities at maturity. imposed on electric generation transmitted out Maintaining liquidity will be dependent upon of Pennsylvania during 1977 through 1979. securing increases in the Company's rates for seWe sufncMnt to recom Hs cosh McMding Non recurring insurance proceeds repre-debt interest, and eam a icir and reasonable senting the recovery of costs incurred during retum on its equity investment. two generating plant outages in 1974 and 1978 contributed to the 1981 eamings increase. The The Company reduced construction i e litigation settlements resulted in the receipt of expenditures for the second consecutive year 1 S4.3 million for our claim crising from c Bay to S199 million in 1981. Extemal financing Shore Unit No.1 transformer failure in Decem-for the 1981 program included S46.9 million { ber.1974. We also received $500.C00 in settle. from the sale and exchange of 5 million new I ment of a claim crising from an outage at Bay shares of common stock, S4.8 million from the Shore Unit No. 4 in December 1978 in which sale of 300,201 common shares through the I the coils of the turbogenerator were damaged. Shareowner Dividend Reinvestment and Stock 4 Wu anticipate that approximately Si mulion ut Purchase Plan, S30 million from the sale of i the proceeds from these settlements will be 300.000 shares of cumulative preferred stock; and S70 muhon from the sale of first mortgage 350 million of short term debt to an uns bonds. In addition, the Company converted i 16 L.

m..

m..

7 l f I l term bank loan. This extemal financing, The Company's 1982 construction program is together with S44 million of funds generated estimated to be S226 million. It is currently ~ intemally, was used to fund the 1981 construc-planned that extemal financing amounting '.o ' ( ' ton program reduce short te:m debt and for approximately S136 million will be provided .ne exchange of $25.6 million of previously from the net proceeds of preferred and com- . N 1 issued first mortgage bonds. mon stock issues, long term debt and the Com-In addition to its continuing needs for long-term pony's Shareowner Dividend Reinvestment an't Stock Purchase Plan. In addition. S40 d:bt and equity funds, the Company utilizes i short term borrowings for normal day to-day milh n will be required for a first mortgage i operations and to meet interim cash needs for bond maturity in 1982. l capital projects. The Company is currently A five percent discount to shareowners authorized by the PUCO to issue up to SiSO on shares purchased through our dividend million of short-term debt At December 31, reinvestment plan will be gh starting with 1981, S22.5 milion of short-term debt. in the the April 1982 dividend payment. We antici-form of commercial paper, was outstanding. pate that a discount on reinvested dividends Unused bank lines o' credit at December 31, will tiract additional investment capital 1981 were S94.1 milhan. Included in this A new tax benefit for reinvested dividends is amount is a S20 million Eurodollar revolvi.g provided in the Economic Recovery Tax Act of line of credit which was established in 1980 to 1981. From 1982 through 1985, most individual facilitate future entry into the European long-participants in qualified public utihty dividend term capital markets and to provide the reinvestment plans will be permitted to reinvest availability of short term credit up to S750 a year (S1500 on a joint retum)in dividends and defer paying any federal In November,1981, the Company orpanized income tax on those dividends until the Toledo Edison Finance Company N.V. a shares are sold. Netherlands Antilles corporation, cs a wholly-owned subsidiary to raise funds outside the Quahiying participants in the plan will be eligi-United States for the Company's construction ble for long term capital gain treatment on the program. The finance subsidiary has not issued sale of shares purchased with reinvested l any securities to date, but the Company looks dividends :.1 they hold the stock for at least one to this new arrangement as a means of having year. We expect to qualify our plan c1though Juditional financial flexibility to meet chang. final technical rules and regulaitons have not [ ing future conditions in the securities markets. been issued by the Intemal Revenue Service. To the Shareowners and Board of Directors cf The Toledo Edison Companyi We have examined the balance sheets and authority in allowing these costs es operatmg statements of capitalization and capitalization espenses in that company's rate case. How ratios of The Toledo Edison Company (an Ohio that decision will affect the Company's corporation) as of December 31.1981, and 19dO, recovery of these costs from its customers in and the related statements of results of opera-future rate cases is uncertain at this time. tions, ecmings reinvested and source of funds invested in plant and facilities for each of the In our opinion, subject to the recovery of the three years in the period ended December 31. costs of mcelled generating units discussed j 198L Our examinations were mada in accord-above, the financial statements referred to i ance with generally accepted auditing stand-above present fairly the financial position of crds and, accordingly, included such tests of The Toledo Edison Company as of December the accounting records and such other 31.1981. and 1980, and the.results of its operations auditing procedures as we considered and the source of funds invested in plant and necessary in the circumstances. facilities for ecch of the three years in the period ended December 31,1981. all in conform-As discussed further in Note 9, the Company ity with generally accepted accounting prin-has incurred costs related to four jointly owned ciples applied on a consistent basis. gsnerating units which have been cancelled. The Company is currently recovering these Arthur Andersen & Co. ( nosts from its customers over a lO-year period-Toledo, Ohio, 1981 the Ohio Supreme Court ruled,in a case January 29,1982. involving another Ohio utility, that The Public Utilities Commission of Ohio had exceeded its t l 17 w

R:sults cf Operati ns For The Years Ended Decernber 31, 1housands of Dollars 1981 1980 1979 v Operating Revenues 358 70 ] 1 Electric 434 853 394 886 I Gas and steam heating 7 431 6 982 6 413 f, Total operating revenues 442 284 401 868 365 121 0 -. Operating Expenses Fuel 123 074 110 423 93 295 b Purchased and net interchanged power (632) 45 348 53 574 Operation 63 976 55 842 44 691 i Maintenance 31 908 29 319 21 137 l Depreciation and amortization 43 427 26 002 29 117 State and Jocal taxes 36 699 31 202 29 760 .l Federalincome taxes 40 842 23 376 25 139 4 Total operating expenses 339 294 321 512 296 713 Operating Income From Sales To Customers 102 990 80 356 68 408 Other Income Allowance for equity funds used during construction 32 498 28 443 23 512 [ Income tax credits applicable to nonoperating activities 9 616 13 218 8 251 Other income and deductions-net 8 852 879 1017 i Total other income 50 966 42 540 32 780 g Income Before Interest Charges 153 956 122 896 101 188 Interest Charges {, long-term debt and other borrowings 86 310 70 866 52 584 Allowance for borrowed funds used during construction (15 491) (15 148) (9 991) Interest charges-net 70 819 55 718 42 593 5-Income Before Extraordinary Gain 83 137 67 178 56 59 ) {. Extraordinary gain trom exchange of common stock for bonds 10 807 r [ Net *.ncome 93 944 67 178 58 595 Preferred stock dividends accrued 23 542 18 021 13 894 EARNINGS ON COMMON STOCK 70 402 49 157 44 701 EARNINGS PER COMMON SHARE (overage shares outstanding-21,507.349 in 1981,19,226,163 in 1980 and 16,848.431 in 1979) Before extraordinary gain $2.77 S2.56 $2.65 Extraordinary gain .50 After extraordinary gain $3.27 $2.56 S2.65 The notes on pages 23 through 29 are an integral part of this stc+ement f 1 ~ [ t t ' l' I I I '8 L..

Balance Sheet ~ December 31. [ Thousands of Dollars 1981 1980 ASSETS j[ ( ' roperty, Plant And Equipment Plant in service, at original cost i 261 174 1 208 001 Less accumulated provision for depreciaten 252 310 220 629 1 008 864 987 372 } Construction work in progress 656 999 518 746 Nuclear fuelin service, at amortized cost 10 951 17 644 1 676 814 1 523 762 I Cunent Assets Cash 2 590 1 945 { Temporary cash investments, at cost 2 541 7 023 ^ Accounts receivable-net 49 737 41 146 3 359 Refundable federalincome taxes Fuel for use in power plants, at overage cost 31 077 28 080 Materials and supplies. at average cost 10 178 10 107 Prepaid taxes 6 948 5 145 Special deposits and other 7 997 7 091 111 068 103 896 Investments And Other Property taxes-subsequent years 19 521 17 226 Deferred charges-Cancelled generating projects 43 048 46 771 Quarto coal costs 9 412 Miscellaneous 8 507 9 788 [ 80 488 73 785 i TOTAL At:SFIS 1 868 370 1 701 443 lf Capitalization 'JABILbES Common stock equity 550 176 478 993 Cumulative pre! erred stock 150 000 150 000 Cumulative preferred stock with mandatory redemption 95 500 66 500 Long-term debt 764 831 714 406 1 560 507 1 409 899 Current Liabilities Short term notes payable 22 500 89 000 Long term debt and preferred stock due within one year 44 588 3 520 Accounts payable 35 406 39 172 Accrued taxes 45 518 38 814 Accrued interest 17 031 15 556 Dividends declared 19 794 15 958 l Advanced fuel cost recovery 4 118 Accrued expenses and other 15 338 11 769 204 293 213 789 i T Accumulated Provisions And Other I Deterred federal income taxes i Accelerated depreciation and amortization 54 823 43 151 J Cancelled generating projects 16 247 17 365 j Property taxes and other 10 552 7 811 Et Federalinvestment tax credits 17 570 8 104 T Deferred credits and other 4 378 1324 j' 103 570 77 755 - (.OTAL LIABILITIES 1 868 370 i 701 443 I f 1he notes on pages 23 through 29 are an integral part of this staternent j 19 IL 2J

n , ) s y Capitalizati72n And Capitalization Ratios Dec;mber 31, 1981 1980 f-Thousands of Douars Common Stock Equity Common Stock, S5 par value, authorized 30,000,000 shares. 7, issued and outstanding at year end 23,448,533 in 1981 7 and 20,148,332 in 1980 117 243 100 742 Premium on capital stock 290 713 255 508 Eamings reinvested .142 220 122 743 Total Common Stock Equity 550 176 35 % 478 993 34 % I Cumulative Preferred Stock Shares outstanding Redemption pJce (Thousands) Eventual l 1981 1980 Current Through_ ' minimum S100 par 4%% 160 160 S104.625 S104.625 16 000 16 000 4.56 % 50 50 101.00 101.00 5 000 5 000 10 000 4.25% 100 100 102.00 102.00 10 000 8.32 % 100 100 105.62 9-1-84 102.46 10 000 10 000 s 7.76 % 150 150 107.257 9-1 82 102.437 15 000 15 000 7.80 % 150 150 106.50 9-1-93 101.65 15 000 45 000 10 % 190 190 105.00 2-28-93 101.00 19 000 19 000 S 25 pai 8.84 % 1000 1 000 26.55 11 30-86 25.25 25 000 25 000 $2.365 1 400 1400 29.85 9-30-82 27.75 35 000 35 000 -150 000 '10% 150 000 10 % S100 par with Mandatory Redemption 3 l 11 % 80 85 S111.00 8-21-84 S101.03 8 000 8 500 r Treasury Stock-11%,5,000 shares (500) 9%% 250 250 106.92 5-31-85 100 00 25 000 25 000 13%% 130 130 112.47 5-31-82 100.00 13 000 13 000 .,) 12.65 % 200 200 112.65 6-f-85 ' 100.00 20 000 20 000 {[. 14.80 % 300 114.80 3+66 100.00 30 000 ~ l 95 500 6% 66 500 5%- t Total Cumulative Preferred Stock 245 500 16% 216 500 15 % t .~s I t I 1 7 l .ho e ,' { 20 L u.. x. - a -. _.. _. -...-....., w..

gpe z.-- y- = + ) ..,y ' N,Y Deconber 31, l y a 1981 1980 1 'Ieng Term Debt i (' _ First Mortgage Bonds, excluding current maturities

• L 10%, due 1982 40 000 3%%, due 1984 14 000 14 000 9.35%, due 1985 50 000 50 000 lM

- 3%%, due 1986 15 000 15 000 IN 4%, due 1988 15 000 15 000 E 14%, due 1990 ' 65 000 65 000 [ 16%%, due 1991 35 000 t 15%%, due 1991. 35 000 J 6%%, due 1997 31 400 35 J 10%, due 1998 650 650 yl" 9%, due 2000 34 328 35 000 7%%, due 2002 26 000 30 000 8%, dus 2003 35 725 40 000 'b 9.65%, due 2006 50 000 50 000 9%%, due 2038 51 900 65 000 l 11%, due 2009 75 000 75 000 F Discount in process of amortization (419) (355) F: 533 584 529 295 ,j Unsecured Notes and Loans

Notes,8.75%, due 1983 through 1997 110 000 110 000 Term bank loan, average interest rate 19.49%,

3 due 1985 through 1987 50 000 Pollution control note, average interest rate 5.71%, due 1984 through 2003 6 000 6 000 . ~ Pollution control ncte,7%%, due 1992 through 2006 15 000 15 000 Pollution control note,7%%, due 1999 through 2009 16 500 16 500 Pollution control loan agreement, average interest rate 10.055%, due 1990 through 2010 30 500 30 500 t Secured Ioan Pollution control locn agreement,10%, due 2000 through 2010 1 000 1 000 ' Nuclear Fuel Lease 2 247 6 111 Total 7,ong Term Debt 764 831 49% 714 406 51% TOTAL CAPITALIZATION 1 560 507 100 % 1409 899 100 % G The notes on pages 23 through 29 are an integral part of this staternent. lsI i-l ;\\ j. 4 4 <{' i'. c - h k,1 r - h' s. y 5 1 21 1 [h \\. k n f, 3

.w., n. - ~ w~.~~ "

~ -

o Earnings R: invested For Th3 Years Ended Dee:mber 31, Thousands of Dollars 1981 1980 1979 y Balance, Beginning Of Year 122 743 117 306 iii 110 Add-Net Income 93 944 67 478 58 59 ] Deduct-Preferred stock quarterly dividends declared 24 222 18 720 14 276 _ 50 245 43 021 38 123 Common stock cash dividends declared 1 - Earnings Reinvested During The Year 19 477 5 437 6 196 l BALANCE, END OF YEAR 142 220 122 743 117 306 [' t I Source of Funds Invested in Plant and Facilities I For The Years Ended December 31. I Thousands of Dollars 1981 1980 1979 h Provided From Intemal Operations Eamings reinvested during the year 19 477 5 437 6 196 ( Principal non-cash items. i. Depreciation and amortization 43 427 26 002 29 117 l 1 Amortization of nuclear fuel 6 694 2 576 4 089 I I Advanced fuel cost recovery 4 118 l-Deferred Quarto coal costs (9 412) Deferred federal income taxes-net 13 295 29 056 9 636 Investment tax credits-net 9 466 (12 697) 4 828 Allowance for equity funds used durin;; construction (32 498) (28 443) (23 5121 Gain from exchange of common stock for bonds (10 807) - ) Total provided from intemal operations 43 760 21 933 30 354 Provided From New Financing i Sole of Securities: i Common stock 51 706 41 001 44 275 I Preterred stock 30 000 33 000 25 000 i First mortgage bonds (principal amount) 70 000 65 650 75 000 Pollution control notes-net i399 33 417 15 622 Conversion of short term debt to a term bank loan 50 000 Net change in short term borrowings (66 500) 65 500 23 500 Net change in temporary cash investments 4 482 (7 023) 4 500 Redemption of long term debt and preferred stock (18 637) (41 179) (7 440) Total provided from new financing 122 450 190 366 180 457 i i Other Allowance for equity funds used during construction 32 498 28 443 23 512 i Net change in cunent assets and liabilities. [ cnd other accounts 141 (5 915) 4 687 Total other 32 639 22 528 28 199 l Tota 1 Sources Of Construct' ion Funds 198 849 234 827 239 010 l Capitalized Nuclear Fuel Lease 8 398 INVESTED IN PLANT AND FACILITIES 198 849 243 225 239 010 ne notes on paces 23 through 29 are on integral part of these statements t L L 22 v L. 4 - u _.i._,

7 NstEs tD Financial Statancnts December 31,1981 (1) Summary of Significant Accounting Policies

c. Taxes

- Construction Overheads (thousands of dollars 1 ( onstruction costs of property, plant and equip-For The Years Ended December 31. 1981 1980 1979 m nt include overheads for payroll related costs FEDERALINCOME TAX EXPENSE f such as taxes. pensions other fringe benefits. and WAS COMPWTD AS FOLLOWS administrative and general expenses. as well as Tax at statutory rates on cn allowance for funds used during construction pre tar income 57 578 35 574 34 722 (AFUDC). AFUDC represents the estimated com-Increases (reductions) posite interest and equity costs of capital funds in taxes due to-used to finance construction to the extent that Allowance for funds used such costs have been transferred to property, during const:uction (22 075) (20 052) (15 411) plant and equipment from the statement of Extraordmary gain from Ihsults of Operations. Ettective January 1.1981, exchange of common stock f r b nos (4 m 1980, and 1979. the Company's AFUDC rate net-Acc* d of tax was 8%%, 8%%. and 7%%, respectively. and ot$e , th

b. Dapreciation and Maintenance depreciation di!!erences 2 375 (3 875) 329 Depreciation rates used in computing deprecia-M2scen neous (1 681) (1 489) (2 752) tion expense shown m the financial statements.

Total federalincome tax cxcept for Davis-Besse Unit No.1. are based upon

• • P"2se 31 226 10 158 16 888 age-life studies and overaged 3.4% in 1981,3.3%

Tax included as credit in Othe inc me 9 616 13 218 8 251 in 1980 and 3.4% in 1979. and are applied on a straight line basis. Depreciation expense on Davis-Federal Income Taxes Included Besse Unit No.1 is based on the unit-of-production in Opmating Expenses 40 842 23 376 25 139 method using a rate which includes a provision FEDERAL INCOME TAX EXPENSE for the Company's share of total estimated DETAILS ARE AS FOllOWS decommissioning costs of $53 million. Payable (Rerundable) 7 477 (6 049) 2 245 In accordance with a Public Utilities Commis-Investment tax credits-sion of Ohio (PUCO) rate order effective Janumy + Deferred 10 352 (13 106) 5 713 1977, the Company began accruing additional Am rtized (653) 204 (756) opreciation of approximately $1.4 million annually to adjust past depreciation provisiens. Deferred taxes-Expenditures for maintenance and repairs of Accelerated depreciation (net) 12 377 11 269 9 716 property including renewals of m*.or items are Cancelled generatmg projects (1 118) 17 365 charged to maintenance expense. Cests of Quarto coal costs 4 329 replacements and renewals of items considered Other provisions (1 538) 475 (30) to be units of property are charged to the prop-Total Fedmal crty aCCounk .come Tax Expense 31 226 10 158 16 888 When property is retired. the cost thereo! plus the removal cost less any salvage is charged to STATE A ND LOCAL TAXES the accumulated provision for depreciation. local property taxes 15 954 15 569 14 100 Ohio State exdse taxes 18 602 14 446 13 466 Other taxes 2 143 1 187 2 194 Total State and local I Tax Expense 36 699 31 202 29 760 I The Company provides deferred federal income taxes on the difference between straight-line and uccelerated tax depreciation methods [ for property additions since December 1973. The i Company does not provide deferred federal t income taxes resulting from other depreciation i differences or from the use of accelerated tax h depreciation methods for property additions prior j to January 1974 since, based on Ohio court and PUCO decisions. the Company is of the opinion i-that such future taxes will be recoverable out of i{, future revenues. Y ? h I 23 Y L

All int: rest costs ars deducted for tax purposes Th7 cctuarial present valu3 of o; cumulated [ as incurred. Th7 ben: fit of int: rest grising from vested and nonv st d plan ben:1.ts, based upon investments in non utility properties, primarily con-salary levels and years of service of employees l struction work in progress, has been classified in as of January 1 of each year, were S34,347,000 income tax credits appucable to nonoperating and $1,093.000 as of January 1,1981 and 7 cctivities. S35,815,000 and Si,613,000, as of January 1, 1 The Company reported a federalincome tax 1980. The weighted average assumed rate of net operating loss in 1980. The loss reduced the retum used in determining these values was 8 tax liabihty for the years 1978,1979 and 1981, percent in 1981 and 6 percent in 1980. Market Investment tax credits have been deferred and value of net assets available for benefits are being added to income over the life of the amounted to S54,528,000 as of January 1,1981 property giving rise to the credits. Unrealized and $45,516,000 as of January 1,1980. investment tax credits from 1976 to 1981 aggre-gate $54 million and will be recorded in future C2) Capitalization years when utihzed.

a. Common Stock Equity

d. Revenues Shares of Common Stock sold during the three Revenues are included in income as billed to years ended December 31,1981 were as follows; customers on a daily cycle billing basis.

1981 1980 1979 Revenues from the larger industrial and Pubhc sales 2 053 707 2 000 000 2 000 000 wholesale customers are based on month-end Exchange of common meter readings. stock for bonds 946 293

e. Fuel Shoreowner Dividend I

estm and stock Beginning August i,1981, the Company began deferred fuel accountm.g with the implementation 3 300 201 2 236 361 2 183 49I Total of new fuel recovery procedures resulting from provisions of a new Ohio law. Fuel costs are being collected based upon an estimated con-Premium on Capital Stock stant cost per kilowatthour over the subsequent (thousands of dollars) six months. Accordingly, to better match fuel For The Years Ended Dece nber 31.1981 1980 1979 expenses with fuel adjustment revenues, fuel cost Bolance. Begmning of Year 255 508 225 688 192 332 charges are being deferred, as they occur,into Premium. net of expense. on the subsequent period in which the increased, or sale or common stock 35 569 30 218 33 49' ) decreased, revenues occur. At December 31. Expenses from sales 1981, the advanced-recovery balance was $43 r preted stock (364) (398) (139 [ million. Balance.End of Year 290 713 255 508 225 688 The cost of nuclect fuel. inclu:hng a provision for estimated disposal costs. is charged to fuel

b. Cumulative Preferred Stock expense based on the rate of consumption. Effec-The Company is authorized to issue 2.000,000 tive with a February 1980 PUCO rate order, the shares of $100 par and 6,000,000 shares of S25 Company has been authonzed to recover par Cumulative Preferred Stock under the Com-disposal costs from its customers.

pany's amended articles of incorporation. The i Retirement income Flan annual dividend requirement on Cumulative Pre-The Company has a non-contributory retirement ferred Stock outstanding at December 31,1981 income plan covering all employee groups The is S23.8 million for an average dividend rate of 9.69%. Company's policy is to fund annual costs as accrued each year and to provide for the amor. At the option of the Board of Directors, the Com-tization of unfunded post service costs. Pension pony may redeem the whole or any part of its cost is determined based upon estimated salary outstanding Cumulative Preferred Stock at any levels and service years of employees at their time upon thirty days notice at the amounts retirement. The total pension cost, including disclosed on the statement of Capitalization, sub-administrative expenses. was $3,728,467 in 1981, Ject to the following additional restrictions. The S4,464,431 in 1980 and 03,940,750 in 1979. Effec-following series may not be redeemed prior to tive January 1,1981, the Company changed the the stated date if the refunding operation amortization period of the unfunded actualial involves an effective cost of money to the Com-hability from 20 to 30 years. The Company also pony less than the rate of the series per annum. changed the amortization periods for other ses Dam unfunded costs from 20 to 30 years, the amortiza-11 % september 1.1984 tion period for experience gains and losses from 12 65% June 1.1985 14 8 h 6 20 to 15 years, and several other actuarial {ne 5989 ) 9 assumptions. These changes were made to 13%% June 1,1990 update actuarial assumptions and did not affect the present value of plan benefits as of January 1,1981. 24 l k

4 L The S2.365 series may not be redeemed prior to pledging additional net property additions which October 1,1982 at an effective cost of money of might otherwise be made the basis for the less than 8.60% per annum. The 9%% series may issuance of additional bonds. not be redeemed prior to June 1,1984. Cumulative Preferred Stock With (3) Exchange of Common Stock for Bonds (- Mandatory Redemption In November,1981, the Company exchanged 946,293 shares of common stock at an exchange The Company sold $100 par value Preferred value of $16.025 per share for $25.6 million of Stock in the amounts of 300,000 shares of the 14.80% series in 1981,130,000 shares of the 13%% outs'anding first mortgage bonds owned by a brokerage firm. The exchange resulted in a non-series and 200,000 shares of the 12.65% series in taxable extraordinary gain of $10.8 million which 1980 and 250,000 shares of the 9%% series in 1979. The Company retired 5,000 shares of the is the difference between the value received by i1% series on September 1,in 1979,1980 and the Company for the stock and the principal 1981. amount of the bonds plus accrued interest. Following are the mandatory sinking fund (4) Assets Subject to Lien requirements for the various series of Cumulative. The mortgage and supplements thereto securing Preferred Stoclo first mortgage bonds issued by the Company con-series Mmimum Yearly Shares E:1ectve Date stitute a direct first mortgage lien on substantially all property and franchises owned by the Com-Q ,] Q pony, other than expressly excepted property 13%% 8 660 1986 which includes cash and securities, accounts 12.65% 8 000 1986 receivable, fuel, supplies and automotive 14.80 % 12 000 1987 equipment. The shares of the above series may be pur-(5) Short-Term Borrowing Arrangements chased at the sinking fund redemption price of The Company regularly obtains funds on an $100 per share plus accrued and unpaid interim basis to meet current construction costs. dividends. The sinking fund redemption require-These short-term funds were obtained during 1981 ments for the next five years are $500,000 (1982), through the issuance of commercial paper. S500,000 (1983).S500,000 (1984).S2,165,000 (1985) The Company has unused lines of credit at and S3,831,000 (1986). December 31,1981 with various banks aggre-e { Sinking fund obligations on these series of pre-gating S94.1 million. The Company pays a com-S red stock must be met prior to the payment of mitment fee for approximately two-thirds of the t i i _ny common stock cash dividends. Preferred lines of credit. The remaining lines of credit shareowners would be entitled to elect a majority are based on informal compensating balance of the Board of Directors if preferred stock arrangements. The Company is expected to dividends have not been paid for four quarters. maintain average deposits equal to 5% to 20% of the line of credit depending on the amount of a g res p h M uu inte est requirement on long-term debt outstanding at December 31,1981, including The balances are not legall/ restricted and also amortization of debt discount and expense, but sem to compnsab h M2 for bhg excluding interest on a nuclear fuellease,is S80.1 services and to provide operating balances to million for an average interest rate of 10.50%.

• P "U Sinking fund redemption requirements and (6) Power Pooling scheduled maturities for long-term debt through The Company owns 4% of the common stock of 1986 are as follows:

Ohio Valley Electric Corporation (OVEC). which (thousands of dollars) has a long term contract to supply power to the Department of Energy (DOE). The proceeds from ^ ung rerm the sale of power are designed to be sufficient nrst Mortgage Bonds Debt for OVEC to eam a retum on its common stock sinking Fund after meeting all of its costs. The Company is Redemption scheduled scheduled entitled to receive and obligated to pay for the Requaements Maturtties Maturities right to receive 4% of chy available power not 1982 2 340 40 000 contracted for by DOE. $8] ] The Company,in the interest of reliability and g 000 1985 3 600 50 000 23 367 economy, entered into a power pooling arrange-1986 3 450 15 000 23 367 ment with four other utilities (CAPCO Group) which involves substantial commitments for In addition, bond sinking fund redemption generation and transmission facilities. premiums for these periods total Si1,970. The ( and indenture covering the first mortgage bonds Prior to 1981, the Company was involved utso provides for a required annual payment in commitments to purchase power from other after certain credits, as defined, to the Trustee as a CAPCO companies. In 1980, the Company Maintenance and Replacement Fund. The Com-bought 150 megawatts of capacity with fixed pony has been satisfying these requirements by 25

annual capacity charges of approximat: ly $9 Company provides its own unancing for this million. In 1979, th2 Company bought 158 investm::nt. Th3 Company's shara of direct megawatts with fixed annucl capacity charges expenses for operation of three jointly-owned of approximately Sii million. units in service is included in operating expenses The Company's ownership share in three on the statement of Results of Operations. CAPCO units, under construction and planned for The following represents the Company's ownen l operation in 1984 and beyond, will total an ship in each of the CAPCO jointly-owned units cn. # 1 investment of approximately Si.5 billion.The December 31,1981. Actual or Ohousands of dollars) Scheduled Ownership Plant Accumulated Construction Generating Unit Cornpletion Share hael In-Service Depreciation _ Woik in Progress DavirrBeme Na i 1977 48.62 % Nuclear 386 127 30 192 20 746 Mansfield No. 2 1977 17.30 % Coal 68 305 7 374 1484 Mansfield No. 3 1980 19.91 % Cc6 126 428 6 123 852 Peny No.1 1984 19.91 % Nuclear 209 209 Beaver Valley No. 2 1986 19,91 % Nuclear 10 316* 214 556 j Perry No. 2 1988 19.91% Nuclear 187 584 'Cornrnon facilities with Untt No 1 l (7) Quarto Coal Arrangement 1981. The PUCO stated that it will permit the Com-pony to recover its actual Quarto costs. including the

c. Coal Supply Contracts previously deferred costs, when trae average prico of Quto coal for sa consecutive months approaches

{ The Company together with the other CAPCO 125% of the market price of comparable coal. companies. has made long-term arrangements with Quarto Mining Company (Quarto), a subsid. During the fall of 1981, the PUCO conducted lary of North American Coal Company to supp *. hearings to investigate Quarto. This directly coal to the Mansfield units. The CAPCO com. involved the Ohio Edison Company, agent for the i panies have severally and not jointly agreed to Quto project. The Company was a party to this guarantee their proportionate shares of Quarto's proceeding. An extensive study was presented 4 debt and lease obligations incurred in connec. which recommended changes in the mining I tion with developing and equipping the mines. plan and proposed treatment of Quarto coal As of December 31,1981, the Company's 6.89% costs. These hearings have been concluded but share of the guarantees was $28.6 million. The the PUCO has deferred any action until a future Company's share of debt and lease obligations hearing. The Company is unable to predict the ) incurred after 1982 would increase in steps to outcome of these proceedings. 12.4% in 1986. (8) Financing Under the terms of the coal supply contract, The Company has limitations imposed upon it by l which expires December 31,1999, the pricing the first mortgage bond indenture and articles of provisions reflect Quarto's costs of operating the incorporation which require the maintenance of mines, including those costs associated with mine required eamings coverage ratios in order to construction. The Company's total purchases under issue additional first mortgage bonds and pre-these contracts amounted to $15,535.694 for 1981. ferred stock. The Company's coverage under the The Company's minimum yearly payments under limitations for first rnortgage bonds at December these arrangements are expec%d to decline from 31,1981 was 2.88 and would allow the issuance S6.5 million in 1982 to S5.9 million in 1986. of $173 million of first mortgage bonds at an In September,1981, the CAPCO companies assumed interest rate of 15%. In addition, the entered into amendments to the coal supply Company's coverage for preferred stock under agreements with Quarto in order to obtain the the articles of incorporation at December 31,1981 right, on an interim basis, to implement a revised was 1.63 and would allow the issuance of $63 mining plan at the Quarto mines with reduced million of additional prefened stock at an production levels to minimize the cost of Quarto assumed dividend rate.of 15%. coal. On the same date the CAPCO companies also acquired from the North American Coal Cor. (9) Canceued Generating Projects -I poration an option until1999 to purchase all of In January 1980, the Corripany, along with the f the Quctio stock. other CAPCO companies. terminated plans for the t construction of the Davis Besse No. 2. Davis Besse 4

b. Cool Cost Deferral No. 3, Erie No.1 and Erie No. 2 nuclear generating At present Quarto coolis more expensive than units. As part of the April 1981 rate increase, the 4

other coal currently available. In January,1981, PUCO approved recovery, over a ten year period, the PUCO ordered the Company not to flow the of the Company's share of the costs already cost of Quarto coal through its fuel adjustment incurred in these four nuclear generating units. clause at more than market pricess The Compcmy Concurrent with the rate increase in April, the ) has deferred $9.4 million of such costs not Company had also commenced the write-off included in the fuel clause through December 31, against current eamings over the ten-year period. 26 l i

p i of the cost of ths four cancelled units This (10) Environmental amounted to an amortization expense of $3.3 Tha Company is subject to environm:ntal reg-1 million for 1981. ulation as to air, water, solid waste. hazardous On July 15,1981. the Ohio Supreme Court ruled wastes, toxic substances and noise matters and as that the PUCO had exceeded its statutory author-to the locction of certain faculties by federal, state (uom its ratepayers, over a ten-year period, its 3 by allowing another Ohio utility to recover and local authorities The Company's construction program includes plans towards the initiation of Investment in these four nuclear generating units such pollution control facilities as it presently Th7 Court based its ruling on a s+rict interpretation foresees as being required at its present gener-of current Ohio regulatory law hmiting allowable ating stations The Company has existing equip-costs of rendering service to normal recurring ment and permits to enable it to comply with all cxpenses incurred during the test period in the applicable laws and regulations, or has plans for rate case. The Company was not a direct party to equipment or has made application for permits this ruling. The other Ohio utility's petition for a or variances I: hearing was refused by the Court. In January Since environmental regulations are in a state 1982, the United States Supreme Court declined to of constant change, the Company cannot esti-Isview the Ohio Supreme Court's decision. mate the effects of potential regulations and On September 16,1981 the PUCO issued an legislation. The Company could incur substantial order to "show cause" as to why the Company's civil and criminal penalties if it fails to comply rates should not be reduced as a result of the with environmental control regulations Ohio Supreme Court decision. In its response, the (q q) Company set forth several grounds in support of Members of the CAPCO Group have entered into continuing its present rates and against writing off leases for the nuclear fuel to be loaded in the five tho accumulated investment in the concelled CAPCO nuclear units. Davis Be ;se Unit No.1, Perry CAPCO units against current eamings. On Unit Nos 1 and 2 and Beaver Valley Unit Nos.1 October 28,1981, the PUCO dismissed the.'show and 2. The Company capitalized its share of the cause proceedings noting that the Company's Davis-Besse Unit No.1 nuclear fuellease relating rates are reasonable and should not be reduced. to the portion loaded into the reactor in June The PUCO delayed a decision on recoverability 1980 in accoruance with provisions of an April of the unamortized cancellation costs pending 1981 PUCO rate order. The Company's share of further consideration in the Company's current these leases is S165.9 million. The nuclear fuel le sing arrangements are expected to be ode-If the Company is ordered to cease amortiza-qu te for nuclear fuel deliveries through the third in of the amounts invested in the four units and qu Iter of 1983. Additional nuclear fuelleasing - i vther means of recovery are not available,it a ngements will be required beyond that time. would be necessary to write-off the Company's Ismaining unamortized share of the termination Estimated payments based on bum up including Werest am SS.5 mHHon in M2, SE3 minim b costs. The Company's unamortized share of the , S26M muum in M4, S263 mHHm in M5 costs incurred to date in the units is about $43 ed W mHHm in M6. million which could result in an estimated net-of-tax reduction in eamings of about S27 million in (12) Interim Financial Reposting the year of write-off. Additional costs could be The following represents the quarterly results. incurred as the Company terminates the out-which are unoudited, but in the opinion of the standing contracts associated with the four units Company reflect all adjustments (which are of a Such additional costs cannot be reasonably normal recurring nature) necessary for a fair estimated at this time but could be substantial statement of results for such periods. Earnings Per Cornrnon (thousands of dollars) Share Incorne Before Eamings Before After Three Months Operating Operating Extraordinary On Cornrnon Extraordinary Extraordinary Ended Revenues Incorne Gain Stock Gain Gain 1981 March 31 108 232 25110 18 082 12 435 S.62 S.62 June 30 105 407 27 169 20 887 14 898 .70 .70 Septernber 30 118 651 28 799 24 660 18 726 .86 .86 Decernber 31 109 994 21 913 19 507 24 343 .60 1.08 1980 March 31 97 976 19 956 17 472 13 645 S.76 $.76 June 30 93 202 18 589 15 383 10 982 .59 .59 September 30 107 382 21 317 19 406 14 520 .72 .72 Decernber 31 103 308 20 494 14 915 10 009 .50 .50 ? 4 i 27 r- -,

{ y (13) The Effects of Changing Prices (Uncudited) values that cra less than curr:nt valur, th m dif-The traditional m thod of reporting Results of f:r:nc3 not only appears as a profit but, cv;n Operations (as shown on page 18) on the basis of worse,it is taxed as though it were profit. historical costs has the effect of overstating the The table below is based upon a 1979 pro-ecmings of a business in "real" terms-especially nouncement by the Financial Accounting Stand-during a period of high inflation. The primary ords Board which involves } resenting financial. ] reason is that depreciation expense, as reported. information to show the effects of general infla-does not adequately reflect the rapidly increcs-tion (Constant Dollar Accounting) and changes in ing costs of replacing property, plant and equip-prices of specific assets, namely property, plant ment When depreciation expense is based upon and equipment (Current Cost Accountmg). RESUL13 OF OPERA 110NS ADJUSIED FOR CHANGING PRICES Thousands of Average 1981 Dollazs Constant Cunent Dollar Cost For the Year Ended December 31,1981 Accountmg Accounting Eamings on Common Stock From Continuing Operations (Before Extraordinary Gain) 59 595 59 595 Diects of Inflation on Commm Stock Equity. Inflation e!!ect dunng 193. on capital investment, increase in specific prices to current costs 289 338 Effect of change in general price level (261 313) Reduction to net recoverable cost (114 367) (135 921) Additional provision for depreciation (25 325) (31 796) (139 692) (139 692) Gain from decline in purchasing power of not amounts owed (pr' narily debt) 94 959 94 959 J (44 733) (44 733) Eamings on Common Stock From Contmuing Operations Adjusted for Changing Prices 14 862 14 862 Although inflation offects all industries, it has During the year 1981, the gain from the decline o more severe impact on the regulated public in value of net amounts owed by the Company utilities than on industry in general The regu-was more than offset by the economic loss latory process does not permit utilities to recover resulting from regulatory requirements which g through revenues any more than the historical prevent the Company from recovering through./ cost of their plant assets even though in an infla-depreciation the inf!ction adjusted cost of its tionary economy the cost to replace such assets plant assets. upon their retirement will substantially exceed The same generally accepted accounting historical cost Accordingly, the amount by which principles used in preparing the Conventional inflation during 1981 increased the cost to Historical Cost Accounting financial statements replace the Company's plant assets is not are used in preparing the Constant Dollar reflected in the historical cost upon which the financial statements. Only the measuring unit is Company's rates are based and therefore is an restated from dollars recorded at the date of the economic loss to the Comp my.~ This loss is shown original transactions to units of average 1981 in the above table under am caption " Inflation purchasing power, as measured by the Con-effect during 1981 On capitalinvestment". sumers Price Index for all Urban Consumers. During a period of inflation, holders of monetary The comparative Constant Dollar and Current liabilities experience an inflationary gain to the Cost values of allitems on the income statement, extent such debts are fixed amounts which will except depreciation, represent the amounts be repaid with dollars of reduced purchasing recorded in the conventional historical cost power. This type of inflationary gain is particu-income statement, which amounts generally Icily significant for electric utilities due to the occurred ratably throughout the year. Fossil fuel substantial amort.s of debt used to finance prop-inventories and the cost of fuel used in gener-erty, plant and equipment. The economic gain to ation have not been restated from their historical the Company by reason of the decrecsa during cost basis. The Public Utilities Commission of Ohio 1981 in the value of the net amounts owed is and Federal Energy Regulatory Commission regu-shown in the table presented above under the lations limit the recovery of fuel and purchased caption " Gain from the decline in purchasing power and gas costs through the operation of power of net amounts owed". adjustment clauses or adjustments in basic rate schedules to actual costs (historical cost basis). ) 1 l l 28 km, m

Also, fu;l invIntories tum ovtr approximat:ly 1 v 1 during tha last fivs years. Tha cumulativo three times a year. For these reasons fu 1 inv n-cffect of rec:nt annual rates of inflation have had tories are effectively monetary assets No federal substantialimpact on all sectors of the economy, income tax benefits for any inflation adjustment especially electric utilities. "he following table fra reflected since current tax law does not allow presents selected operating and financial data ( sy consideration for the erosion of capital which for the most recent fiw years on a historical cost exist.; during inflationary period.s The current basis and on an adjusted for inflation basis as year's provision for depreciation on the Constant measured by the Consumer Price Index for all Dollar and Current Cost amounts of property, Urban Consumers. plant and equipment was determined by apply-Eamings on common stock and eamings per ing the ratio of the provision for depreciation share on a constant dollar basis and on a current ov::r the average property, plant and equipment cost basis are shown below as 11 only the amount on the Historical Cost basis, to the indexed reportable as on additional provision for depre-plant values. ciation were deducted from the reported amount The erosion in the value of money through of such income. The 1980 data has been revised inflation has been at or near the double-digit to reflect actual indices. FINANCIAL DATA ADJUSTED FOR EFTICIS OF CHANGING PRICES For the Years Ended December. 31, 1981 1980 1979 1978 1977 Consumer Pnce Index (annual average) 272.4 246.8 217.4 195.4 181.5 Operating Revenues (thousands) Histoncal cost basis $442 284 $401868 $365121 $340 056 $276 794 Restated to average 198i dollms 442 284 443 553 457 493 474 060 415 420 Restated to average 1977 dollars 294 694 295 539 304 827 315 866 276 794 i l Dividends Declartd per Common Shme l Histoncal cost basis $2.30 $2.20 $2.20 $2.14 S2.12 I Restated to average 1981 dollms 2.30 2.43 2.76 2.98 3.18 Restated to average 1977 dollars 1.53 1.62 1.84 1.99 2.12 Consumer Pnce Index (year end) 282.0 258.4 229.9 202.9 186.1 Mmket Pnce per Common Share (year end)- Historical cost basis $16.50 S15.88 $ 17.50 $21.63 $25.13 Restated to year end 1981 dollars 16.50 17.33 21.47 30C 38.08 Restated to year end 1977 dollars 10.89 11.44 14.17 19.84 25.13 Nnings on Commen Stock (thousands) l Historical cost basis $59 595" $49157 $44 701 Constant dollar accounting 34 270 36 330 28 559 Current cost accounting 27 799 31 844 23 340 Eamings per Common Share Historical cost basis $2.77" $2.56 $2.65 Constant dollar accounting 1.59 1.89 1.70 Current cost accounting 1.29 1.66 1,39 Common Stock Equity (thousands) Historical cost basis $550176 $478 993 $432 554 Current / Constant accounting 505 443 425 571 380 518 Increase in General Price level Over (Under) Increase in Specific Prices (thousands) $(28 024) $84 323 S76 891 Gain From Dechne in Purchasing Power of Net Amounts Owed (thousands) $94 959 $111341 S101 398 Property, Plant and Equipment Net of Accumulated Depreciation (Includes Non-Utility Plant)* (thousands) Histoncal cost basis $1677 879 Si 524 808 $1310179 Current cost accounting 3 125 062 2 804 449 2 389 879 Net Recoverab:e Cost of Net Assets (Cunent/ Constant accounting)(thousands) $532 547 $458 489 $408 911 ' Current Cost Values represent the changes in specific prices of property, plant and equipment. from the year the plant was acquired to average 1981 values and is determined by indexing surviving plant by the Handy Whitman Index of Public Ut1hty Construction Costs "Before Extraordinmy Gain y { $ l j \\t i t t 5 } 29 u.

} Financial Review Thousands of Dollars 1981 1980 1979 1978 1977 1971 Operating Revenues 320 9 Residential 138 781 126 085 113 464 106 512 86 977 Commercial 90 863 80 836 72 354 67 563 55 870 21 194 Industrial 151 539 137 860 128 931 120 570 97 586 33 838 Other 53 670 50 105 43 958 39 438 31 296 14 599 ~ 434 853 394 886 358 707 334 083 271 729 101 702 Electric-total Gas and steam heating 7 431 6982 6 414 5 973 5 065 2 662 Total 442 284 401 868 365 121 340 056 276 794 104 364 % Increase from prior year 10% 10 % 7% 23 % 24 % 11 % Operating Expenses Fuel 123 074 110 423 93 295 82 039 73 677 21 573 Purchased and net interchanged power (632) 45 348 53 574 55 850 86 735 8 643 Operation 63 976 55 842 44 691 38 883 27 951 18 306 Maintenance 31 908 29 319 21 137 19 604 12 249 6 700 Depreciation and amortization 43 427 26 002 29 117 26 532 19 565 10 617 State and local taxes 36 699 31 202 29 760 24 320 19 129 10 075 Federal income taxes 40 842 23 376 25 139 27 397 6 173 7 755 Total 339 294 321 512 296 713 274 625 245 479 83 669 % of Total Rcvenues 77% 80% 81% 81 % 89% 80% Income Operating Income 102 900 80 356 68 408 65 431 31 315 20 695 Allowance for equity funds used during construction" 32 498 28 443 23 512 17 470 24 770 2 672 Income tax credits-non operating activities 9 616 13 218 8 251 6 484 9 032 562 Other income and deductions-net 8 852 879 1 017 720 (7) 100-Income before interest charges 153 956 122 896 101 188 90 105 65 110 24 0. ) Interest charges (86 310) (70 866) (52 584) (42 746) (35 249) (8 754) Allowance for borrowed funds used during construction

• 15 491 15 148 9 991 7 090 18 794 Income before extraordinary gain 83 137 67 178 58 595 54 449 48 655 15 284 Extraordinary gain 10 807 Net income 93 944 67 178 58 595 54 449 48 655 15 284 Preferred stock dividends 23 542 18 021 13 894 13 020 10 518 1675 Eamings on common stock 70 402 49 157 44 701 41 429 38 137 13 609 Common Stock Average Shares Outstanding (000's) 21 507 19 226 16 848 14 900 12 909 5 160 Eamings per Share Before extraordinary gain 2.77 2.56 2.65 2.78 2.95 2.64 Extraordinary gain

.50 After extraordinary gain 3.27 2.56 2.65 2.78 2.95 2.64 Retum on Average Equity Before extraordinary gain 11.6 % 10.5 % 10.7 % 11.3 % 12.4 % 14.4 % After extraordinary gain 13.5 % 10.5 % 10.7 % 11.3 % 12.4 % 14.4 % Market Price Range per Share High 18.38 20.75 23.38 25.50 27.13 35.50 Low 15.00 15.00 17.38 20.63 24.13 26.63 Year End 16.50 15.88 17.50 21.63 25.13 30.75 Book Value per Share 23.46 23.77 24.15 24.29 24.02 18.39 Dividends Declared per Share 2.30 2.20 2.20 2.14 2.12 1.81 'In 1971 allowance for funds used during construction was reported in total in other incorne. ) P [ 30 L

r[ StatisticalRevi;w 1981 1980 1979 1978 1977 1971 .Wes-millions of kilowatthours (j Residential 1919 1971 1 934 1914 1874 1 366 i Commercial i294 1282 1 256 1231 1 233 924 ? Industrial 3 080 3 165 3 559 3 617 3 475 2 757 l Municipals and other 858 970 960 923 906 832 Total 7 151 7 388 7 709 7 685 7 488 5 879 % Increase (Decrease) from prior year (3)% (4)% 3% 4% 7% Electric Customers-year end Residential 241 663 240 142 238 353 234 450 230 583 208 448 Commercial 23 573 23 532 23 636 23 334 23 226 21 984 Industrial and other 3 844 3 818 3 695 3 551 3 478 2 963 Total 269 080 267 492 265 684 261 335 257 287 233 395 Residential Usage Annual kilowatthours per customer 7 966 8 232 8 166 8 244 8 192 6 640 Average price per kilowatthour (cents) 7.23 6.40 5.87 5.57 4.64 2.35 Annual revenue per customer (dollars) 576 527 479 459 380 156 Load-megawatts Net capability-at time of peak 1773 1760 1825 1813 1536 1 228 Peak load 1315 1310 1 395 1386 1393 1 054 Reserve factor at peak 35 % 34 % 34 % 31% 10 % 17% Load factor 66 % 68 % 67 % 67 % 66 % 65 % M:rgy-millions of kilowatthours l Generated-net 7 491 6 560 6 884 6 674 5 972 4 845 Purchased and net interchanged power 157 1352 1 348 1566 2 128 1435 Total 7 648 7 912 8 232 8 240 8 100 6 280 Fuel Fuel cost per kilowatthour (cents) 1.68 1.65 1.33 1.20 1.19 .44 Efficiency-BTU per kilowatthour 10 274 10246 10 262 10 283 10 247 10 037 Total Assets-thousands of dollars 1 868 370 1 701 443 1 467 512 1 255 947 1 101 610 355 797 Pr:perty, Plant and Equipment-thousands of dollars Plant in service 1 261 174 1 208 001 979 809 950 873 727 226 367 918 Accumulated provisions for depreciation 252 310 220 629 201 895 176 450 153 463 95 589 Annual Construction Expenditures-thousands of dellars 198 849 234 827 239 010 169 888 194 283 53 056 Capitalization-thousands of dollars Common stock equity 550 176 478 993 432 554 382t84 328 100 94 908 Cumulative preferred stock 150 000 150 000 150 000 150 000 150 000 41 000 Cumulative preterred stock with mandatory redemption 95 500 66 500 34 000 9 500 10 000 Iong term debt 764 831 714 406 611 137 560 644 494 280 154 687 Tctal 1 560 507 1 409 899 1 227 691 1 102 228 982 380 290 595 Number of Employees-year end 2 335 2 331 2 260 2 188 2 062 1 809 L. i i I-31

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^ 2-J -3;_ _T. .;- G P~- 2 i ? " ' _ 3 .s. Board of Directors, Sected L/E Isabel F. Martin. Mamn S Kobacker. Virgil A. Gladieux. Willard I Webb. III. Robert H Davies. Jchn P Wilhamsort Samuel G Canon. Robert G Wmgerter. Dwood L Elberson. Richard E Anderson. Henry A Page. Jr, Standing L/R Richard P Crouse. Wendell A. Johnson. Donald G Nicholsort Lowell E. Roe. Executive Officers Board of Directors Wih. Im 1 Webb. III(A)*(E) Bocid Chauman. Chief John P. Wilhamson. 59(30) Richard P. Anderson (O) Exemtve Mca Chairman of the Bocrd and Partner and General Manager. Chief Executive Omcer The Andersons Ohio Cititens Bancorp. Inc Wendell A Johnsort 54(32) Samuel G Carson (E)(N). John P W11hamson (E)* Chcarman and Chie! ' President and Chief Operatng Omcer Board Chairman Exeative C"acer Toledo Trust Co and Richard P Crouse.42(21) Vice President. Nuclear Toledo Tnzstcorp. Inc. Robert G Winger*er (N)(O)* R1 dPC Chairman. Execunve Commitee V ce Pres e L he Relatons ce Presi e Nuclear Libbey Owens Ford Company Frank W. Keith. 62(34) Rcbert R Davies (C)*(O) Vice President Administration Senior Vice President Key to Directors' Committees Duector of Corporate Development David A Nelson.41(3) Owens Ilhnois Inc (A) Audit Corrarattee Vice President Corporate Denlopment Elwood L Elbenon (C) (C) Compensation Ccmmittee Donald G Nicholson. 55(31) President and Chief Executive Omcer. (E) Executive Comrranee Vice President Finance Dinner Bell Foods. Inc-(N) Nomina'ing Commitee i Lyman C Ph11hps.42(19) Stanley W Gustafson (C) Vice President Administictive (O) Opma' ions Comee President Dana Corporc*lon Semces (*) Committee Chairman Wendell A Jhn(E) lowell E Roe 56(33) President and Chie! Vice President Energy Supply Operating Omcer Directors Emeriti David K Zaskt 49(31) Mamn S Kobacker(E)(N) Vice President Customer Semces Board Vice Chairmart Stratman Cooke. 6O(35) Kobacker Stores. Inc and Wilham S Carlson Secretary Pnvate Investor Virgil A Glad.eux Donald R Saunders 46(24) Isabel F Martin (A) Treasurer Consultant Paul G Busby.33(11) United Way-Metropohtan Division Controller Donald G Nicholson We dent. Fmarice Numbers c!!er omcers' names indicate age and years of semce. Henry A Page. Jr (A) Director of Development The Medical College of Ohio at Toledo 1.cwell E Roe l Vice President. Energy Supply l - ) l l 32

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l hecutive Ottices The AnnualMeeting o edo O o 436 Rie Armal Mr.eting of The Toledo Phone (419) 259-5000 Edison Company will be held at l 10 a.m. (EST.) on Apnl 27.1982 in the Dividend Disbursing Agent Company's headquarters. Edison The Toledo Tmst Company Toledo. Ohio 43603 Plaza.300 Madison Avenue. Toledo. Ohio. Formal notice of the meeting Q~4 Rock Transfer Agents will be sent to shareowners with the y The Toledo Trust Company proxy statement Toledo. Ohio 43603 Morgan Guaranty Trust Company of New York New York. N.Y.10015 This report including the hnancial Stanley W. Gustafson, President and Dividend Reinvestment Agent statements,is submitted for the Citbank. NA generalinformation of Toledo Edison Director. Dana Corporation, was Box 3305 Company's shareowners. It is not elected to the Board in December. New York. N.Y.10043 intended to be used in connection 1981. He is a Director of Linbeck Con-Rock Registrars with any sale or purchase of any struction Company. the Ohio Medical Ohio Citizens Bank securities. Indemnity Corporation. HighwcY Toledo. Ohio 43603 A copy of Form 10-K as filed with the Users Federation. Automotive Infor-Morgan Guaranty Trust motion Council a Trustee of the Company of New York Secunties and Exchan9e Commis-University of Toledo Corporation. and New York. NY.10015 sion will be available to share-wners upon wntten request to the a member of the Friends of St Luke's Mortgage Trustee Hospital He is also a member of the The Chase Manhattan Bank.NA p s Wce hes1M hn Board of Directors of Spicet S. A., New York.NY.10081 Mexico, and Metalcon. Venezuela-Auditors Arthur Andersen & Co. Virgil A. Gadieux resigned from the fo oNo"4360 Board of Directors on November 24. Counsel 198L having reached the mandatory retirement age for directors. He was TMa n Avenue cted Director-Emeritus, concluding Toledo. Ohio 43604 Vects of service, the longest term of any director presently on the board. Exchge hgs Common Mr. Gladieux is Chairman of the Board and Chief Executive Otficer of $e*w[st S k x the Gladieux Corporation. a billion-Unhst Tra es dollar food service company head. quartered in Toledo. Cincinnati Stock Exchange Philadelphia.Bainmore and "9* Fred E. Fuller. Director Emeritus and Senior Partner. Fuller. Henry. Hodge Preferred-S25 par value-8.84%. and Snyder the Company's General h[ork Stock Exchange Counset passed away in October. 1981. Mr. Fuller became a Director of Pretened-SiOO par value-4%% Toledo Edison in 1949 and Director 8.32%. 7.76% and 10% Ementus in 1973. He had been Amenc n Stock Exchange General Counsel for the Glass Con-Bonds toiner Manufacturers Institute and 10%-Due 1982. 9.35%-Due 1985 was a member of several bar 9% -Due 2000,7%% -Due 2002 associations. 8% -Due 2003. 9.65%-Due 2006 9%%-Due 2008,11% -Due 2009 New York Stock Exchange 0

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