ML20070U225
| ML20070U225 | |
| Person / Time | |
|---|---|
| Site: | Point Beach  |
| Issue date: | 04/03/1991 |
| From: | Brady A WISCONSIN ELECTRIC POWER CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 9104080249 | |
| Download: ML20070U225 (33) | |
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r Wisconsin Electnc POWER COMPANY 231 w Me, van Po 8:n 2ca uwuoe w snoi (41m>212345 April 3, 1991 Director of Nuclear Reactor Regulation U.S.
Nuclear Regulatory Commission Washington, DC 20555 Ladies and Gentlemen:.
In accordance with 10' C.F.R. Section 50.71, enclosed is the 1990 annual report to atockholders of Wisconsin Electric Power Company, which includes certicled financial statements.
Such annual report accompanies Wicconsin Electric's definitive information statement, whic.h is being mailed to stockholders today.
Wisconsin Electric Power Company is the holder of Facility operating License Nos. DPR-24 and DPR-27 issued by your Commission under Dockets 50-226 and 50-301, respectively.
3 Ver tro y
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Ann Marie Brady Assistant Secreta y CLP/kir Enclosure-ktr5:arpt-we cc:
Mr. Gerald Charnoff
-Shaw, Pittman, Potts &'Trowbridge 1800 M Street, N.W.
Washington, DC 20036
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9104080249 910403
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Wisconsin Electnc POWER COMPANY 231 West hiichigan Street P.O. Box 2046 hiilwaukee, Wisconsin 53201 INFORhlATION STATEhlENT and ANNUAL REPORT TO STOCKilOLDERS INFORhtATION STATEh1ENT April 3,1991 This statement is furnished in connection with the annual meeting of stockholders of Wisconsin Electric Power Company (WE or the company) to be held on April 23,1991, at the principal office of the company at the Public Service Building, 231 West hiichigan Street, hiilwaukee, Wisconsin, and all adjournments thereof, for the purposes listed ir, the Notice of Annual hiceting of Stockholders. The company's annual report to stockholders accompanies this information statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
However, you may vote your shares of preferred stock at the meeting.
VOTING SECURITIFS As of htarch 5,1991, the company had outstanding 44,508 shares of Six Per Cent. Preferred Stock; 960,000 shares of Serial Preferred Stock ($100 par value), consisting of 260,000 shares of 3.60% Series and 700,000 shares of 635% P.ics; and 33,289,327 shares of common stock. Each outstanding share of each class is entitled to one vote. Sukholders of record at the close of business on htarch 5,1991 will be entitled to vote at the meeting.
All of WE's outstanding common stock, representing 97% of its voting securities, is owned beneficially by its parent company, Wisconsin Energy Corporation (Wisconsin Energy or WEC).
RELATIONSillP WITIl INDEPENDENT PUllLIC ACCOUNTANTS Price Waterhouse has acted as independent public accountants for the company or its predecessor continuously since 1932, and was appointed by the company's board of directors upon recommendation of Wisconsin Energys board of directors to serve as such during the current year. Representatives of the firm will not attend the annual meeting of the company, but will be present at Wisconsin Energy's annual meeting on April 24,1991 to make any statement they may consider appropriate and to respond to questions which may be directed to them.
MEETINGS OF Tile IlOARD OF DIRECTORS The board of directors ordinarily meets monthly, in 1990 the board held twelve regular meetings. None of the directors attended less than 83% of the aggregate number of meetings of the board and the committees on which they served.
The executive committee, which did not meet in 1990, may exercise all of the powers vested in the board during periods between board meetings except, among other things, action regarding dividends or other distributions to stockholders, election of officers or the filling of vacancies on the board or its committees. The company does not have audit, nominating or compensation committees, h Ris document is printed on recycled paper.
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l INFORMATION CONCERNING NOMINEES FOR DIRECTORS Early in 1991 the companys board of directors
- declassified" the WE board such that all directors are to be clected annually to one year terms f ather than staggered three year termsc Accordingly, at the 1991 annual-meeting, there will be an cicction of twche directors to hold office until the annual meeting of stockholders in 1992 and un'il their respective successors are duly elected and qualified.
The Bylaws of the company prodde that any vacancy which occurs among the directors may be filled by the affirmative vote of a majority of the remaining directors, and that any director so elected. hall hold ofGee until the next annual meeting of stockholders.
Russell W. Britt, who served Wisconsin Energy and/or its subsidiaries as an of0ccr since 1962 and as a director since 1975, retired effective April 1,1991. The board of directors elected Robert 11. Gorske to fill the resulting vacancy on the board.
The nominees named below have consented to being nominated and to serve if elected. The board of directors does not expect that any of the nominees will become unavailable for any reason. If that rhould occur before the meeting, another nomince or nominces will be selected by the companys tmard of directors.
The information relating to occupations, busir. css experience, directorships and ownership of equity securities is based on data obtained from the directors and officers. Ages of directors are shown as of December 31, WR Wisconsin Energy Corporation's principal subsidiaries are Wisconsin Electric Power Company and Wisconsin Natural Gas Company.
NOMINEES FOR DIRECTORS (TERMS EXPIRE IN 1942)
RICilARD A. AHDOO,46, has been chairman of the board and chief executive officer of the company and Wisconsin Natural since June 1990. IIc has been executive vice president of Wisconsin Energy since January 1990.' lic had been president and chief executive officer of WB since January 1990 and was president and chief -
operating officer since 1989, Mr. Abdoo served as executive vice president of Wisconsin Electric during 1989 and as a senior vice president from 1984 to 1989. lie had been a vice president of Wisconsin Energy since 1987.
lic has been a director of the company since 1989 and is a member of the executive committee. lic has been a director of Wisconsin Energy since 1988 and is also a director of Wisconsin Natural and M&I Marshall & lisley Bank. Mr. Abdoo, who resides in Milwaukee, Wisconsin, does not own any of the companys stock, but-is the beneficial owner of 2,872 shares of Wisconsin Energy's common stock.
JOllN l'. HERGSTROM,44, has been president and chief executive of0cer of flergstrom Enterprises, an operator of hotels and General Motors Corporation automobile dealerships, since 1974. lie has been a director of Wisconsin Electric since 1985 and is a member of the executive committee. Ile has been a director of Wisconsin Energy since 1987. Ele is also a director of Kimberly. Clark Corporation, Midwest Express Airlines, Inc. and First National Bank of Menasha. Mr. Bergstrom, who raides in Neenah, Wisconsin, does not own any stock of the company, but owns beneficially 2,000 shares of Wisconsin Energy's common stock.
JOIIN W. HOSTON,57, has been president and chhf operating officer of the company since June 199(k lie had been executive vice president and chief operating officer since January 1990 and was a senior vice president from 1982 to 1990, lie has been a director of the company since 1988 and is a member of its executive committee, lie was elected a director of Wisconsin Energy effective April 1,1991. Mr. Boston, who resides in Milwaukee, Wisconsin, does not own any _WE stock, but owns beneficially 1,279 shares of Wisconsin Energ/s common-stock.
ROHERT II,'GORSKE,58, has been vice president and general counsel of the company and of Wisconsin
- Natural since 1976, and general counsel of Wisconsin Energy since 1981. Ile was elected a director by the WE board effective April 1,1991 to fill a vacancy, lie is an alternate member of the executive committee and also serves as a director of Wisconsin Natural. Mr. Gorske, who resides in Milwaukee, Wisconsin, does not own any of the companys stock, but owns beneficially 8,928 shares of Wisconsin Energ/s common stock.
-GENFVA IL JOllNSON,61, has been president and chief executive officer of Family Service America, an organization representing private agencies in the United States and Canada that provide human service programs, since 1983. She had been senior vice president of the United Way of America, a human services organization, from 1978 to 1983, where she was responsible for strategic long range planning and public policy. Mrs. Johnson has been a director of Wisconsin Electric since 1988 and is an alternate member of its executive committee. She 2
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I as been a director of Wisconsin Energy since 1988. Mrs. Johnson, who resides in hiilwaukee, Wisconsin, does n,ot own any of the compan/5 stock, but owns beneficially 808 shares of Wisconsin Energ/s common stock.
CHARLES S. McNEER,64, has been chairman of the board and chief executive officer of Wisconsin Energy since 1987 and had served as president and chief c:ccutive officer from 1981 to 1987. lie has announced his retirement as an officer and employee of Wisconsin Energy effective May 1,1991, lle was chairman of the board and chief executive officer of the company and Wisconsin Natural from 1982 to 1989. Mr. McNeer has been a director of the company since 1970 and is a member of its executive committee lie has been a director of Wisconsin Energy since 1981. lie is a director of Wisconsin Natural, but has resigned from that board effective May 1,1991. lie also serves as a director of Universal thxis Corporation and is chairman of the board of directors of the Federal Reserve Bank of Chicago. Mr. McNect, wha resides in Milwaukee, Wisconsin, does not own any of the compan/s stock, but owns beneficially 32.573 shares of Wisconsin Energ/s common stock.
JOllN L MURRAY,63, a corporate director, was chairman of the board of Universal 1%ds Corporation, a manufacturer and marketer of food ingredients and selected consumer fomi items, until his retirement in June 1990, lie had been chairman of Universal Foods since 1984 and was its chief executive officer from 1979 to 1988. lie has been a director of Wisconsin Electric since 1983 and is an alternate mernber of its executive committee. lie has been a director of Wisconsin Energy since 1987, lie is also a director of Universal Ib.h Corporation, Briggs & Stratton Corporation, Firstar Corporation, First Wisconsin National Bank of Milwaukee, Marcus Corporation and Twin Disc, Inc. Mr. Murray, who resides in Milwaukee, Wisconsin, does not own any of the compan/s stock, but owns beneficially 2,000 shares of Wisconsin Energ/s common stock.
DAVID K. PORTER,47, has been a senior sice president of Wisconsin Electric and a sice president of Wisconsin Natural since 1989. At Wisconsin Electric, he had been sice president corporate planning since 1986 and was r.r. assistant sice president from 1985 to 1986 lie has been a director of the company since 1989 and is an alternate member of its executive committee. lie is also a director of Wisconsin Natural. Mr. Porter, who resides in Milwaukee, Wisconsin, does not own any of the compants stock, but owns beneficiady 4,339 shares of Wisconsin Energ/s common stock.
MORRIS W. REID,65, has been sice chairman of the board, president and chief operating officer of Versa Technologies, Inc., a manufacturer of fluid power and silicone rubber products, since 1989 lie had been chairman of the board of Versa Technologies from 1982 to 1989. Since 1978 he has also been an independent management consultant and corporate director. lie was, from 1972 to 1978, chairman of the board of J. I. Case Co., a manufacturer of construction and farm machinery Mr. Reid ha3 been a director of Wisconsin Electric since 1979 and is an alternate member of its executive committee, lie has been a director of Wisconsin Energy since 1987. lie is also a director of Banc One Wisconsin Corporation, Stolper Industries, Inc., A&E Manufacturing Company and Versa Technologies, Inc. Mr. Reid, who resides in Racine, Wisconsin, does not own any of the compan/s stock, but owns benefsially 2,182 shares of Wisconsin Energ/s common stock.
JERRY G. REMMEL,59, has been a senior sice president of the company and sice president - fmance of Wisconsin Natural since 1989, lie has been treasurer of Wisconsin Energy since 1981. Ile had been sice president and treasurer of the company since 1983 and treasurer of Wisconsin Natural since 1974. lie has been a director of the company since 1989 and is an alternate member of its executive committee. lie is also a director of Wisconsin Natural. Mr. Remmel, who resides in Milwaukee, Wisconsin, does not own any of the companfs stock, but owns beneficially 4,531 shares of Wisconsin Energ/s common stock.
I'REDERICK P. STRATTON, JR., $1, has been chairman and chief executive officer of Ilriggs & Stratton Corporation, a manufacturer of small gasoline engines and automotive locks, since 1986. lie had served as president and chief executive officer of Briggs & Stratton since 1977. lie has been a director of Wisconsin Electric since 1986 and is a member of its executive committee, lie has been a director of Wisconsin Energy since 1987. 'lle is also a director of Briggs & Stratton Corporation, Banc One Corporation, Danc One Wisconsin Corporation, Midwest Express Airlines, Inc. and Weyco Group, Inc. Mr. Stratton, who resides in Milwaukee, Wisconsin, does not own any of the compan/s stock, but owns beneficially 2,400 shares of Wisconsin Energ/s common stock.
JON G. UDEl.L,55, has been Irwin Maier Professor of Business at the University of Wisconsin Madison since 1975. Mr. Udell has been a director of Wisconsin Electric since 1977 and is a member of its executive committee lie has been a director of Wisconsin Energy since 1987. From 1982 through 1989 he was chairman of the board of directors of the Federal llome Loan Bank of Chicago. lie is a director of Research Products Corporation and Versa Technologies, Inc. Mr. Udell, who resides in Madison, Wisconsin, does not own any of the compan/s stock, but he and members of his family are the beneficial owners of 3,687 shares of Wisconsin Energ/s common stock. Mr. Udell disclaims beneficial ownership of 1,722 of such shares.
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OFFICERS (Figures in parentheses indicate age and years of service with Wisconsin Electric Power Company as of December 31, IVAL)
RICilARD A. ABDOO (46,15) JOllN 11. OOETSCll (57, 32)
FRED A.TREBATOSKI($5,31) chairman of the board sice president & secretary sice president customer
& chief executive officer operations ROBERT H. GORSKE (58,26)
JOllN W. BOSTON (57,8) vice president & general GORDON A. WILLIS (52,29) president & chief counsel treasurer operating officer RICilARD R. GRIGG, JR. (42,20)
RICIIARD R. PILTZ (50,25)
DAVID K. PORTER (47,21) vice president system operations controller senior dee president NANCY R. NOESKE (53,11)
ROBERT E. LINK (39,10)
JERRY G. REhth1EL (54,35) vice president consumer assistant vice president senior vice president relations
- marketing DOUGLAS S. BOTT (44, * )
JOllN E. SPEAKER (59,14)
ANN N1ARIE BRADY (38,2) vice president information vice president communications assistant secretary systems SALLY A. NE% TON (41,17) assistant treasurer CARLYLE W FAY (64,24) vice president nuclear power
- Employed by the company September 24, IPXL The directors and officers of the company as a group (26 persons) do not own any of the company's stock, but 118,475 shares of common stock of its parent company, Wisconsin Energy Corporation (0.18%
beneficially own of such class). Shares indicated in this information statement as beneficially owned by the individual directors and the directors and officers as a group are stated as of February 28,1991, and include, in accordance with applicable Securities and Euhange Commission rules, any shares as to which each individual directly or indirectly has or shares voting power and/or investment power and any shares as to which the individual has the right to acquire beneficial ownership within 60 days of such date. Also included are any sharea owned by the respective indi idual's spouac, minor children or any other relative sharing the same residence, as well as any shares held by the respective :ndhidual in a fiduciary capacity or held for his or her account in Wisconsin Energy's Tax Reduction Act Sto;k Ownership Plan,its Automatic Dividend Reinvestment and Stock Purchase Plan and its Customer Su Ownership Plan, and the company's hianagement Employee Savings Plan. Shares are so included nnether or not the director or officer disclaims actual beneficial ownership of any of them.
OTIIER MATTERS The board of directors is not aware of any other matters which are proper subjects for action by security holders which may come before the meeting.
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COMPENSATION DIRECTORS' COMPENS ATION Effective January 1991, directors' fees are $1,500 per month retainer fee plus $1,000 for each board or committee meeting attended in person or by telephone or other electronic means or $300 for each signed, written unanimous consent in lieu of a meeting. In addition, a per diem fee of $1,000 will be paid for travel on company business for caJ ' y on which a board or committee meeting is not held. Although certain directors of the company also serve on Wisconsin Energy's board, only a single meeting fee for meetings of such boards of directors held on the same day, a single per diem fee and a single retainer are paid. Employee directors receive no directors' fees. Nonemployee directors may defer fees so long as they serve on the board of the company and/or its affiliates.
EXECUTIVE OITICERS' COMPENSATION The following table contains information on total cash compensation paid by the company, for services in all capacities to the company in 1990, to each of the Gve most highly compensated key policy making executive officers and to all executive officers as a group:
Total Cash Name of Individual and Principal Capacities Sened Compensation (t)(2)
RICtIARD A. ABDOO
$264,331 president and chief executive officer of the company until June 1990; chairman of the board and chief executive officer thereafter JOllN W. BOSTON
$231,876 executive dce president and chief operating oflicer of the company until June 1990; president and chief operating officer thereafter ROBERT 11. GORSKE
$ 166,350 vice president and general counsel of the company DAVID K. PORTER
$147,940 senior vice president of the company JEhRY G. REMMEL
$138,272 senior vice president of the company All executive officers as a group (19 persons)
TOTAL
$2,326,413 (1) Total cash compensation is salaries plus any cash bonuses and Executive incentive Compensation I'lan (EICP) awards, whether deferred or paid. The EICP and other compensation plans are described in the following pages. Other compensation, not otherwise described in this proxy statement, to each named executive officer and to all executive officers as a group does not exceed the lesser of $25fKK) per person or 10 percent of their aggregate cash compensation.
(2) The compensation reported is for that portion of 1990 during which the respective individuals served as executive officers of the company.
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INFORMATION ABOUT Pt.ANS The company maintains certain group health, dental and vision care insurance coverage for its executive ofGects which is not generally available to all salaried employees. In 1990, the net cost to the company of the premiums for such additional benefits for hiessrs. Abdoo, Boston, Gorske, Porter and Remmel was $2,909, $3,643, $3,210,
$3,283 and $2,955, respectively, and $50,146 for all executive officers as a group.
The compan/s parent, Wisconsin Energy Corporation, has a qualified Tax Reduction Act Stock Ownership Plan (TRASOP), in which substantially all employees of the company with more than one year of service participate.
Prior to plan year 1987, annual employer contributions were made toward the purchase of Wisconsin Energy common stock for participants due to the availability of certain tax credits under the Internal Revenue Code.
The Tax Reform Act of 1986 removed the last of the available tax uMits. Therefore, the last plan year for which regular employer contributions were rnade to the TRASOP was 1986. The TRASOP was amended in 1988 to allow, from time to time, employer discretionary contributions. In 1990, there were no such employer contributions. Dhidends from the shares in a participant's account are reinvested on a taedeferred basis. A participant will automatically receive the shares in his or her account after retirement or termination of employment. A participant also has the option to receive the shares in his or her account when (i) the participant reaches age 59-1/2,(ii) the shares have been held in the account for at least 84 months or (iii) the participant reaches age 55 and has been in the TRASOP for at least ten years (limited to varying amounts of i
qualifying shares under speciGe circumstances).
The company has a qualified hianagement Ernployee Savings Plan (h1 ESP) in which all its executive and management employees are eligible to participate. Under the h1 ESP a participant may elect to have the employer contribute to a trustee for the employce's account. in lieu of paying as salary, up to 15W (except for restrL.tions which may apply in certain cases) of aC base salary determined without giving effect to such election. In 1990, a participant's elective coGt>ution to the hiESP was limited to $7,979 by the internal Revenue Code. This limit may be changed irom time to time pursuant to the Code. The company contributes additional funds to match 25% of the Grst 6% of annual base salary contributed. The contributions, which are vested when made, are invested by the trustee in one or more investment funds as selected by the participant from a group of five funds. Account balances are distributed upon retirement or termination of employment, subject to earlier withdrawalin certain events of financial hardship. The h1 ESP was amended in 1990 to permit qualifying participants to borrow generally up to 50% of their account balance, limited to a maximum loaa of
$50,000. The MESP meus the requirements under Section 401(k) of the Internal Revenue Code and accordingly participants are not subject to federal income tax at the time salary or matching amounts are contributec., at on earnings on the invested funds, but instead are subject to tax at or following the time of distributions and withdrawals. Compensation deferred in 1990 under the hiESP by participating executive ofGeers is included in the cash compensation table on page 5. Company matching contributions made in 1990 under the h1 ESP for hiessrs. Abdoo, Boston, Gorske, Porter and Remmel were $1,678, $1,092, $1,755, $1,795 and $1,616, respectively, and $24,369 for all executive officers as a group.
Since 1989 Wisconsin Energy has had in effect the Executive incentive Compensation Plan (EICP). The objectives of the plan are to improve the Gnancial and operational performance of Wisconsin Energy and its utility subsidiaries by providing designated elected officers of such companics with a Gaancial incentive opportunity which reinforces and recognizes company, organizational and indisidual performance and to enhance the sbility of such companies to attract and retain talented executives. Subject to the approval of the WEC and WE boards of directors, the compants participants in the EICP are designated by Wisconsin Energys chief executive officer. Effective January 1,1991 the EICP was amended to allow additional designated executives of Wisconsin Energy and its utility subsidiaries to participate. The Wisconsin Energy board and its compensation committee approve the long-and short term performance goals which apply in each calendar year, and also approve individual incentive awards,if any, to be made early the following year based on attainment of those goals. Awards under the EICP may not exceed 20% of a participant's base salary, and are payable in the following manner: 25% of an individual's award will be paid in cash and 75% will be converted to share equivalents, in an unfunded bookkeeping account, based on the prior year end closing price of Wisconsin Energys common stock. Such account will be held for three years, during which time dividend equivalents will be carned and also converted to share equivalents _ based on the closing price of Wisconsin Energys common stock on each dhidend payment date. At the end oi a three-year period the value of the accumulated share equivalents for a particular year will be paid in cash, such payment to be based upon the prior year end closing price of the common stock at the time. A participant may clect to defer receipt of all or a portion of either or both the cash or share equivalent portions of any incentive award through the Executive Deferred Compensation Plan described below, hiessrs. Abdoo, Boston, Gorske, Porter and Remmel and thirteen additional executive officers of the company were designated as participants in the 1990 EICP. Incentive awards made to executive ofGeers of the company in 1991 for performance during 1990 are included in the cash compensation table on page 5. The numbers of share equivalents credited as a result of dhidend equivalents carned during 1990 on 6
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. p'rior awards for hiessrs. Abdoo, Boston, Gorske, Porter and Remmel were 3tl,41,16,26 and 24, respectively, and 322 for all executive ofGeers as a group.
hisconsin Energy has also had in effect since 1989 the Executive Deferred Compensation Plan (EDCP) to provide designated elected officers and other executives of Wisconsin Energy and its utility subsidiaries the opportunity to defer income until retirement. Subject to the approval of the WEC and WE board 3 of directors, the company's participants in the EDCP are designated by Wisconsin Energy's chief executive officer. Messrs.
Abdoo, Boston, Gorske, Porter and Remmel and fourteen additional executive officers of the company were designated to participate in the EDCP in 1990. Through the EDCP a participant may defer, until termination of employment, up to 30% of monthly base salary and up to 10M of any incentive awards made under the EICP described above. Interest at the prime rate will accrue on the average balance in a participant's account and will be adjusted and credited semi-annually. Since, under the compan/s management employee retirement plan, base salary deferred through the EDCP and incentive and special awards carned are not included in the compensation base for calculating a participant's retirement income, a "make whole" benent relative to such amounts (calculated without regard to any limitations imposed by the Internal Revenue Code on pension benefits or covered compensation) will be paid as a supplement through the EDCP out of general corporate assets. In addition, a special contribution will be ma e to a participant's EDCP account to "make whole" any htESP employer matching contributions lost through deferrals elected under the EDCP or because of other limitations imposed by the Internal Revenue Code on a participant's level of participation in the hiESP. The distribution options available to participants are (i) single lump-sum, (ii) ten-year payout or (iii) five-year payout.
Compensation deferred by the executhc officers under the EDCP during 1990 is included in the cash compensation table on page 5.
In 1990, "make whole" payments under the EDCP with respect to hlESP employer matching contributions for Messrs. Abdoo, Boston, Gorske, Porter and Remmel were $1,926, $1,226,
$577, $250 and $296, respectively, and $7,221 for all executive officers of the es.mpany as a group.
The management employee retirement plan of the company covers approximately 1,450 employees, including ofGects. The cash compensation for the indhiduals named in the table on page 5 and compensation for purposes of the management employee retirement plan plus various supplemental plans described herein do not differ substantially.
So as to be consistent with current business practice, the management employee retirement plan was modined in early 1991 to climinate the one year waiting period in determining the number of years of credited senice, making such credited senice essentially equivalent with years of employ-4t. Accordingly, the credited years of senice under the management employee retirement plan for hiessrs. 'adoo, Boston, Gorske, Porter and Remmel are 15 years,8 years,26 years,21 years and 35 years, respecti ly.
The formula used for calculating retirement benefits is a step rate 'ormula which provides a Social Security integrated benefit based upon percentages of a participa@ plan war;s (highest 36 consecutive months average) for up to 30 years of credited senice with additional (lower) seentages of plan wages for credited service in excess of 30 years up to a maximum of 10 years.
Federal laws place certain limitations on pensions which may be paid and the amount of compensation which may be taken into account in calculating benefits to be paid from federalincome tax qualified plans. Pension amounts which execed such limitations will be paid as an operating expense through the Wisconsin Energy Corporation EDCP and Supplemental Executive Retirement Plan (SERP), as appropriate, on the same basis as if they were paid out of the retirement plan. The annual retirement benefits payable for the life annuity form of pension for an indhidual retiring at age 65 in 1991 for specified compensation levels and years of service are shown in the following table. Such amounts are not subject to any deduction for Social Security benents. The indicated benents are calculated without regard to Internal Revenue Senice limitations affecting benefits from tax qualified pension plans and include benefits payable under the EDCP and $ERP.
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Annual Retirenwnt llenefits at an Assumed Average Assutrud Retirenwnt Age of 65 Years Years or Credited service 11ased on liighest 36 Consuutive Months 20 Years 30 Years 40 Years 5
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1 45,000 13,749 20,625 24,569 100,000 32.724 49,087 58,393 155,000 51,699 77,550 92,219 210,000 70,674 106,012 126,o4) 265,000 89,649 134,475 159,869 320,000 108,624 162,937 193,603 The SERP (described below) prosides designated participants a "make whole" benefit equal to any decrease in pension which may have resulted when the management employee retirement plan adopted the step rate pension formula. Such "make whole" benefit will be paid as a pension supplement out of general corporate assets.
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For many years Wisconsin Energy, and previously Wisconsin Electric, has had the plan now titled the Supplemental Executive Retirement Plan (SERP), Subject to the approval of the WEC and WE boards of directors, the company's participants in the SERP are designated by Wisconsin Energy's chief executive offiser, Messrs. Abdoo, Boston, Gorske, Porter and Remmel and fourteen other executive officers of the company participated in the plan during 1990. In addition to the previously described benefit payments which relate to the managewent employee retirement plan, the SERP provides for monthly payments of benclits for a period of ten years to the participant after retirernent or to his or her beneficiaries in the event of the participant's death, equal to 12,5% (2.5% upon the death of the participant) of the average of the participant's highest 36 consecutive months oNompensation (such compensation includes the monthly average of any incentive payments awarded during such Smonth period and any base salary or other compensation that would have been paid during such Emonth period but was not paid due to elective deferrals made by the participant under a savings or other deferred compensation plan) No such payments are made until after the retirement or death of the participant, Wisconsla Energy or the company have entered into agreements with Messrs. Abdoo, Boston and Gorske, as well as D, S Bott and J. E Speaker, vice presidents, each of whom could not accumulate by normal retirement age the maximum number of years of credited service under the management employee retirement plans of the company and/or Wisconsin Natural. According to these agreements, such companies will provide such officers with supplemental retirement payments which will make their total retirement benefits at age 60 or older from such companics, including benefits under such plans, and which may take intoWount any vested benefits payable from previous employcts, substantially the same as those payable to employcu who arc in the same compensation bracket and who became participants in such plans at the age of 25.
AVAllAllllIIY OF FORM 10 K The Wisconsin Electric Form 10-K report for 1990 to the Securities and Exchange Commission is available at no cost by writing to tu sice president and secretary, John 11. Goetsch,231 West Michigan Street, P,0, llos 2046, Milwaukee, Wisconsin 53201, 8
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WISCONSIN EL[CTRIC POWER COMPANY 1990 ANNUAt RtPORT 10 STOCKHOLDERS ACCOMPANYlNG INFORMATION STAl[MEhi TABLE Of CONTENTS ITEM PAGE Business A-2 Market for Common Equity and Related Matters A-2 Selected financial Data.................
A-3 Quarterly financial Data A-3 Hanagement's Discussion and Analysis of financial Condition and Results of Operations A-4 income Statement
.. A-10 Statement of Cash flows................. A-ll Bal ance Shee t...................... A-12 Capitalization Statement
................ A-14 f
Common Stock Equity Statement.............. A-15 j
Notes to financial Statements.............. A-16 D i re c t or s........................ A 2 3 Officers
............,,.......... A-23 Report of Independent Accountants............ A-24 A1
BUSlHlSS Wisconsin Electric Power Company (" Wisconsin Electric *) is an operating public utility incorporated in the State of Wisconsin in 1896.
Its operations are conducted in two business segments, the primary operations of which are as follows:
Business Segment Operations Electric Operations Wisconsin Electric generates, transmits, distributes and sells electric energy in a territory of approximately 12,600 square miles with a population estimated at over 2,000,000 in southeastern (including the Milwaukee area), east central and northern Wisconsin and in the Upper Peninsula of Michigan.
Steam Operations Wisconsin Electric distributes and sells steam supplied by its Valley Power Plant to space heating and processing customers in downtown Milwaukee.
For financial information about industry segmchtt. see Note L to the financial Statements.
Wisconsin Electric is a subsidiary of Wiscs.. sin Energy Corporation (" Wisconsin Energy"), which owns all of Wisconsin Electric's Common Stock.
MARKET FOR REGISTRANT'S COMMON LOUlTY AND RELATED MATTERS The amount of cash dividends declared on Wisconsin Electc'.c's Common Stock during the two most recent fiscal years are set forth 'n iow.
Dividends were paid to Wisconsin Electric's sole common stockholder, Visconsin Energy.
Quarter Total Dividend 1989 1
$38,467,654 2
$26,132,122 3
$26,132,122 4
$26,132,122 1990 1
$61,132,122 2
$42,963,035 3
$42,963,035 4*
$42,963,035
- In the fourth quarter, $15 million of cash dividends declared were not paid until the first quarter of 1991.
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SILICitD flhAhCIAL DA1A I
flhANCIAt
^
1990 1989 19gg 1987 1956 1
(thousands of Dollars)
~
ternings evallable f or c omen s t ettholder 5 179,990 5 lb4,354 5 173,021 l 165,3D8
$ 148,614 4
l Operating revenues:
i (tectric S1,208, D45 11,245,701 51,275.396 51,120,682 51,121,267 Steam 12,126 12,292 12,363 10,5D8 11,895 Total operating revenues 51,220,171 51,257,993 11,287,759 51,131,190 11,133,162 Total assets 12.972,903 82,967,006 82,871,D45 52,767,525 82,535,953 Long term debt and 1
preferred stock =
redemption required
$1,002,852 11,016,197 11,050,339 l 855,483 5 254,259 4
Salts AND CUlf0MIR$
1990 1909 19FA 1987 19f.6 tiectric Megawatt hours abld 23,6$6,727 24,293,356 24,050,862 20,154,824 18,952,796 Custmers (tnd of year) 896,393 682,B83 870,780 859,449 647,761 Steam Pounds (mi t t i ons) sold 2,213 2,160 1,8 79 1,657 1,941 Custowers (thd of year) 470 482 494 510 510 DUAtitRLY flh4NCIAL DATA Ihree Manths Ended March June 1990 1989 1990 1957 (thoucands of Dollars) total operating reventes
$405,590 1321,694
$298,679 $297,556 operating income 8 56,524 5 63,312 S $1,916 8 53,412 ternings available for connon stockholder S 45,449 8 47,813 5 39,511 l 39,398 three Months inded Sept enber Decemter IV90 1989 1990 1989 (thousands of Dollars) total operating revenues
$315,760 5322,711
$300,142 6316,032 operating income 5 64,131 5 69,911 5 53,628 5 59,110 ternings available for connon stockholder S 52,187 i $5,932 8 42,843 5 41,206 The qJarterly results of operations are not directly conparable tecause of seasonal and other factors, see Management's Discussion and Analysis f or further discussion.
I l
l ternings and dividends per share are hot provided as all Wisconsin Electric's Cecron Stock is held by Wisconsin Energy.
A3
MANAGEMEN1'S DISCUSSION AND A!4ALYSIS Of fINAf4CIAl.
CONDl'10N AND RESULTS Or OPERA 110NS RE M 15 Of OplRA110NS Earnings Earnings for Wisconsin Electric decreased to $179,990,000 in 1990 compared to
$184,364,000 in 1989.
The decrease reflects lower revenues due to a $29,7 million or 2.9 percent electric rate decrease on an annual basis, and an employees' strike at the Empire and lilden iron ore mines which lasted from August 1 to December 1,1990 and warmer than norinal temperatures in the first and fourth quarters of 1990 which negatively impacted electric kilowatt hour sales.
The mines are the largest customers of Wisconsin Electric Power Company.
Electris Sales and Revenues Total electric sales of Wisconsin Electric, detailed below by customer class, decreased 2.6 percent in 1990 compared to '.989.
Electric Sales-Megawatt Hours 1990 1989
% Change Residential 6,196,887 6,088,234 1.8 Small Commercial and Industrial 5,954,603 5,779,111 3.0 Large Commercial and Industrial 8,763,987 9,487,029 (7.6)
Other 2,066,045 1,995,379 3.5 Total Retail and Municipal 22,981,522 23,349,753 (1.6)
Resale Utilities 675,205 943,603 (28.4)
Total Sales 23,656,72, 24,293,356 (2.6)
The decrease in sa'es largely reflects lower sales to the Empire and Tilden iron ore mines as described above.
Electric sales excluding the mines y
increased approximately 1 percent during the year.
Approximately 7 percent of total 1990, and 10 percent of total 1989 electric sales were to the mines.
Electric revenues decreased 3 percent during 1990 reflecting the decrease in Wisconsin retail electric rates, the milder weather and the reduced sales to the iron ore mines.
Electric sales declined at a compound annual rate of less than 1 percent in 1990 and 1989, when compared to 1988, while electric revenues declined at a compound annual rate of 2.7 percent.
Electric sales in 1989 were 1 percent greater thar
~188.
This increase reflected greater sales to connercial and industrial
.omers, partially of fset by reduced sales resulting from cooler summer temperatures in 1989 compared to 1988.
Revenues in 1989 were 2.3 percent lower than 1988 primarily because of a 528.8 million rate reduction.
A-4
4 MANAGEMENT'S DISCUSSION RESULTS Of OPERATIONS (Cont'd)
Electric Operation and Maintenance Expenses Total electric operating expenses, excluding income taxes and depreciation, decreased $10 million in 1990 compared to 1989, in 1990, fuel expenses were
$26 million lower than in 1989 but were partially of fset by a $19.5 million increase in purchased power costs.
The higher purchased power costs were primarily the result of additional energy purchases at prices that were attractive when compared to the cost of available company generation.
Under the Wisconsin rotati electric fuel adjustment procedure, Wisconsin retaii electric rates may be adjusted if cumulative fuel costs (including purchased power costs) deviate from a prescribed range and are expected to continue to be above or belaw the authorized range.
Under this procedure, Wisconsin Electric reducco its retail electric rates on November 28, 1090 by $13.6 million, on an annualized basis, and by $8.4 million, on an annualized basis, on July 31, 1989. No adjustment was made in 1988.
Since 1988, operating expenses, excluding income taxes and depreciation, declined at a compound annual rate of 3.7 percent.
This was largely the result of higher expenses in 1988 due to the acceleration of approximately $16 million of maintenance projects into 1988 from future years and a $16.9 million payment to an Employees' Benefit 1 rust to fund a major portion of retiree life insurance benefits.
Other items The increase in depreciation expense during 1990 and 1989 as compared to 1988 is primarily the result of $6.1 million and $7.7 million of removal costs respectively, associated with the retirement of Wisconsin Electric's Oak Creek units 1-4 and higher depreciable plant balances.
Expenses related to the Oak Creek retirement are being amortized over a six year period.
Interest income for 1990 includes $15.3 million in one-time refunds associated with certain tax settlements.
Rates and Regulatory Matters The table below shows the projected annual revenue impact of recent rate changes authorized by regulatory commissions based on the sales projections utilized by those commissions in setting rates.
The pSCW on January 4, 1991 authorized a 3.3 percent retail electric base rate increase for 1991 which increased the authorized regulatory return on common equity from 12.9 to 13.1 percent and eliminated the $13.6 million fuel credit which had been in effect since November 28, 1990.
The pSCW regulates Wisconsin retail electric and steam rates, while the federal Energy Regulatory Commission (FERC) regulates wholesale electric rates.
The Michigan Public Service Commission regulates retail electric rates in Michigan.
A-5
MANAGEMENT'S DISCUSSION Results of Operations (Cont'd)
Revenue Percent increase Change in Effective Service (Decrease)
Rates Date Wholesale electric
$(2,768,000)
(4.0)%
01/01/90 Retail electric, Wis.
(29,685,000)
(2.9) 01/12/90 Steam heating 147,000 1.2 01/12/90 fuel electric, Wis.
(13,619,000)
(1.4) 11/28/90 Retail electric, Wis.
35,405,000 3.3 01/04/91 Steam heating 216,000 1.6 01/04/91 Electric Sales Outlook Assuming moderate growth in the economy and normal weather, Wisconsin Electric presently anticipates that electric kilowatt. hour sales will grow at a compound annual rate of approximately 1.9 percent over the five-year period ending December 31, 1995.
This forecast is subject to e number of variables, including the economy and weather 3 which may affect the actual growth in sales.
LlQUIDITY AND CAPITAL RESOURCES Investing Activities Wisconsin Electric invested $656 million in its business during the three years ended December 31, 1990. Construction expenditures for new or improved facilities represented the largest component totaling $482 million, followed by net capitalized conservation expenditures of $87 million, purchases of nuclear fuel at $62 million, and payments to an external trust for the eventual decommissioning of the company's Point Beach Nuclear Plant totaling
$48 million.
Cash Provided by Operating and financing Activities During the three years ended December 31, 1990, cash provided by operating activities totaled $1,072 million.
During this period, internal sources of funds, after the payment of dividends, exceeded the company's capital requirements.
The company had no new power plants under construction during the period, financing activities during the three year period included the issuance of
$326 million of long term debt.
In 1988 Wisconsin Electric issued $200 million of First Mortgage Bonds - a 9 5/8% Series and a 9.85% Series, the proceeds of which'were used to repay short term debt incurred when the Presque Isle Power Plant was purchased in December of 1987.
During the three years ended December 31, 1990, the company continued efforts to reduce its overall cost of capital.
In 1989 Wisconsin Electric sold $60 million of 9-1/8% Series first Mortgage Bonds, the proceeds of which were used to refund a major portion of its 11-1/2% Series first Mortgage Bonds.
The remaining bonds of this series were called for redemption in September, 1990.
During this same three year period, the company retired a total of $207 million of long-term debt and reduced short-term debt by $143 million.
Dividends paid on Wisconsin Electric's common stock were $175 million, $117 million, and $95 million during 1990, 1989, and 1988 respectively.
A-6
4 HANAGEMENT'S DISCUSSION - Liquidity and Capital Resources (Cont'd)
Capital Structure The company's capitalization at December 31 is shown below:
1990 1989 Common Equity 51.4%
52.1%
Preferred Stock 4.4 4.4 Long Term Debt (including current maturities) 41.8 43.5 Short Term Debt 2.4 kbb$b%
ibb$b%
Compared to the electric utility industry, generally, Wisconsin Electric has a relatively high ratio of common equity to total capitalization and low debt and preferred stock ratios.
This conservative capital structure along with strong bond ratings (Wisconsin Electric currently has ratings of AA+ by Standard & Poor's Corporation and Aa2 by Moody's Investors Service) and projected internai cash generation should provide the company with access to the capital markets when necessary to finance the anticipated growth in the company's business. At year end 1990, Wisconsin Electric had $102 million of unuseo lines of bank credit, $20 m:llion of cash and cash equivalents, $82 million of short-term debt and $63 million of construction funds held by trustees.
During 1990, Moody's lowered its ratings of Wisconsin Electric's first mortgage bonds from Aaa to Aa2.
As of December 31, 1990 there were no electric utilities' securities with the " triple-A" rating by either Standard &
Poor's Corporation or Moody's investors Service.
C.
'tal Requirements 1991-1995 The estimated capital requirements for Wisconsin Electric for the years 1991-1995 are outlined below:
1991 1992 1993 1994 1995 (Millions of Dollars)
Construction
$216
$282
$289
$295
$234 Conservation 38 30 34 28 31 Bond Haturities/
Sinking funds 4
0 30 2
2 Changes in Fuel Inventories (13)
(4) 9 9
13 Decommissioning Trust Payments 17 18 19 20 20 Total
$262
$326
$381
$354
$3LO Construction expenditures during the forecast period are anticipated to be higher than the level of expenditures experienced over the prior three years, due primarily to the construction of 600 megawatts of natural gas-fired i
A-7
- _ = - _ -. -
- - -_- - - -~ -. -
i j
MANAMMNT'S DISCUSSION + Liquidity ;nd Capital Resources (Cont'd) -
combustion turbines to provide needed peaking capacity.
During the five year forecast period, 150 megawatts of peaking capacity is expected to be built and i
placed into service in each of 1993 and 1994 and 300 megawatts in 1995.
Additional peaking capacity is expected to be puced in service later in the 1990's.
The next base load unit is not expected until after the year 2000.
Wisconsin Electric has entered into purchase power contracts intended to maintain adequate reserve margins prior to completion of construction of the gas combustion turbines, in adoition to power plant maintenance activities, other significant construction orojects scheduled during the period include renovation work at the Port Washington Power Plant and construction of a trcnsmission line in the Upper Peninsula of Michigan.
This transmission line project will enable the Presque Isle Power Plant to increase the reliable transfer of power to the Wisconsin system by an additional 130 megawatts, providing a total capability of 300 megawatts.
Capital Resources During the five year period ending in 1995, the company expects internal sources of funds from operations, af ter dividends, to provide about 70 percent of the capital requirements.
The remaining Lash requirementr are expected to be met through the reduction of existing cash investments, construction funds on deposit with trustees, short term borrowings and the issuance of long term debt.
Current plans call for debt issues of $100 million in 1991, $150 million in 1993 and $100 million in 1994.
CLEAN AIR ACT The Amendments to the Clean Air Act that were signed into law on November 15, 1990 mandate significant nationwide reductions in nitrogen oxide (NOx) and sulfur dioxide (502) emissions.
Phase 1 of the acid rain control provisions of the legislation, which takes effect in 1995, is not expected to significantly impact Wisconsin Electric because of actions already undertaken to meet the strict 502 emission limitations set by Wisconsin's acid rain law, which take effect in 1993.
Limited additional measures may be necessary to comply with the NOx emission control and the continuous emission monitoring requirements of Phase 1.
The preliminary compliance strategy under consideration for Phase I calls for continued use of low sulfur coal and the installation of low NOx burners, if required, and continuous emission monitoring equipment at one of the company's electric generation plants.
The total cost of the equipment that may be needed for compliance is estimated at approximately $25 million based on today's costs. The cost of this equipment, if needed, along with additional operating costs could increase electric service rates by about 1 percent.
The preliminary compliance strategy that the company is considering for Phase II, which takes effect in the year 2000, includes fuel switching and installation of control equipment, if needed, along with continuous emission monitoring equipment.
Equipment costs, which may be as high as $200 million based on today's costs, coupled with potential additional operating costs, A-8
t HANAGEMENT'$ DISCUSSION Clean Air Act (Cont'd) could increase electric rates as much as 4 to 5 percent.
Because the regulations have not yet been completed by the U.S. Environmental Protection 4
Agency, these cost and rate estimates are subject to change and will be refined once the regulations are published.
The company will seek credits which may be availa'1e as a result of its energy conservation activities as part of its Phase I and Phase !! compliance strategies.
PORT WASHINGTON POWER PLANT Wisconsin Electric and the EPA have been involved in litigation in federal court to determine whether 3roposed maintenance work at the Port Washington Power Plant would subject tio plant to certain requirements under the Clean Air Act.
Following the court actions, Wisconsin Electric and the EPA reached an accord on air emissions isscos.
The project, which comprises work on units 1 4, includes upgrading the turbine generators and boilers and the installation of additional emission control equipment, at a cost of a pproximately $120 million. The project is expected to be performed during tle 1991-1994 time frame.
An air emissions perrnit which the EPA has reviewed has been obtained from the Wisconsin Department of Natural Resources.
PSCW approval of the project was granted on December 6, 1990.
a 9
i l
l A9
W15COWsth titritlC POWit COMPAHY ikCOM! $1AllMEh!
Year trdec Decenter 31 1990 1989 1988 fthousends of Dollers)
Operating eevenues Electric 11,208,445 51,245,T01 41,275,396 Steam 12,126 12,292 12,363 Total Cyerating Revenues 1,220,171 1,257,993 1,287,759 Operating intenses Fuel (Note B) 263,889 290,074 303,962 Purchased po or 50,916 31,387 29,182 Other egeretton expenses (Note C) 268,345 257,708 273,801 haintenance 128,675 145,057 165,930 Depreciation (Note b) 131,981 129,344 118,078 Tames other then income tones 63,269 60,977 62,243 Federal ineone ten (Note t) 59,442 70,987 61,085 ltate income tax (Note ()
15,035 1T,418 16,490 Deferred incone tones net (Wote t) 17,507 14,982 21,330 investnent tax credit net (hete ()
(5,087)
(5,666)
(5,744)
Total Cgwreting tapenses 993,972 1.012,248 1,046,357 operating ineone 226,199 245,745 241,402 Other income and Dedactions Interest income 32,603 21,714 15,139 Allowance f or other funds useo during const ruction (Note f) 5,845 4,899 3,073 Miscellaneous. ret 8,029 (1,696)
(3,521)
Federal incone ten (hete ()
(6,678)
(252) 159 State incone tan (Note E)
(2,318)
( 1, 04 9)
(5 79)
Totcl other ineone and Decketicru 37,481 23,616 14,271 Incone Bef ore Interest charlee 263,680 269,361 255,673 Interest Charges tong term oebt 79,806 80,755 76,614 other interest 835 737 1,766 Allowance for borrowed funds used during construction (hote F)
( 2,8 79 )
(2,413)
(1,656) total Interest therges 77,762 79,079 76,724 het income 18),918 190,282 178,949 Preferred Stock Olvidena f eguirement 5,928 5,928 5,928 Earnings Avellable for Co m en stockholder l 179,990 l 184,354 5 173,021 Notes Earnings and dividends per shore of cawmm stock are not applicable because all of the cunpany's comnon stock 16 owned by Wisconsin Energy Corporation, 4
See Notes to financial Statements, A 10 m
um
til5COllW fitCitlC POW (R COWANY
$fAllMENT OF CASH FLOWS feet f rded Decoater 31 1970 1989 1988 (thousaMs of Dollars) 0;erating Activitiest het incone
$185,918
$190,282
$178,949 Reconcillation to casht Deprecletion 131,981 129,344 118,078 Nucleat fuei etrense anortitation 23,507 22,950 25,826 Def erred income taxes net 17,507 14,982 21,330
.'nvestnent tax credit net (5,087)
(5,686)
(5,744)
Allowance for other funds used dJetng construction (5,845)
(4,899)
(3, 0 73 )
ten refurds
$67 8,901 60,937 Chan0e in: Accomts receivable (6,366)
(4,114)
(13,068)
Inventories (13,246)
(6,291)
(3,719)
Accomts payable (9,431)
(2,693) 22,040 Other current est as 8,197 15,039 (23,997)
Other current tiebilities (15,138) 13,789 (17,426)
Other (106) 11,508 15,824 Cash Provided by Operatin9 Activities 312,458 383,112 375,957 investing Activitiest Construction experditures (176,954)
(178,087)
(127,143)
Allowance for borrowed furds used during construction (2,879)
(2,413)
(1,656)
Nuclear fuel (20,121)
(19,337)
(22,375)
Wucteer decomissioning trust (17,248)
(16,245)
(14,555)
Conservation rebates eM toans net (29,396)
(26,881)
(30,273)
Change in construction f urde held by trustce 9,735 i,883 926 Other 11,863 (1,249) 6,355 Cash Used in investing Activities (225,000)
- 242,329)
(188,721)
Financing Activities:
Sale of long term debt 25,793 81,033 218,908 Retirenwnt of long term debt (61,925)
(96,824)
(48,272)
Change in short term debt
$5,804 (198,693)
Divioords on stock scaman (175,021)
(116,865)
(95,207)
. preferred (5,928)
(5,928)
(5,928)
Cash Used in Financing Activities (161,277)
(138,584)
(129,192)
Change in Cash ord Cash (quivalents
$(73,819)
$ 2,199
$ 58,044 See Notes to Financial $tatements, A-ll
a WISCONSIN ELECTRIC POWER COMPANY BALANCE SHEET December 31 ASSETS 1990 1989 (Thousands of Dollars)
Utility Plant Electric
$3,456,639
$3,307,414 Steam 29,686 28,121 3,136,325 3,335,535 Accumulated provision for depreciation (1,460,199)
(1,347,860) 2,026,126 1,987,675 Construction work in progress 96,905 88,629 Nuclear fuel - net (Note B) 60,252 62,587 Net Utility Plant 2,183,283 2,138,891 Other Property and Investments Nuclear decommissioning trust fund (Note D) 163,480 146,232 Construction funds held by trus',ses 63,299 73,034 Conservation investments 90,345-68,654 Other 4,423 4,019 Total Other Property and Investments 321,548 291,939 Current Assets Cash end cash equivalents 20,112 93,931 Short term investments.
8,999 Accounts receivable, net of allowance for doubtful accounts - $5,589 and $5,832 78,553 72,187 Accrued utility revenues 84,601 89,210 Fossil fuel (at average cost) 77,487 68,099 Materials and supplies (at average cost) 71,382 67.524 Prepayments 43,356 45,698 Other assets 5,906 7,152 Total Current Assets 381,397 452,800 Deferred Charges and Other Assets Accumulated deferred income taxes 59,711 58,533 Other 26,964 24,843 Total Deferred Charges and Other Assets 86,675 83,376
$2,972,903
$2,967,006 See Notes to financial Statements.
A 12
1 WISCONSIN ELECTRIC POWIR COMPANY BALANCE SHEET December 31 LIABILITIES 1990 1989 (Thousands of Dollars)
Capitalization (See Capitalization Statement)
Common stock equity
$1,180,324
$1,190,355 Preferred stock redemption not required 30,451 30,451 Preferred stock - redemption required 70,000 70,000 Long term debt 932,852 946,197 i
Total Capitalization 2,213,627 2,237,003 Current Liabilities Long term debt due currently 25,733 47,971 Notes payable - commercial paper
$5,804 Accounts payable 67,605 77,036 Payroll and vacation accrued 21,914 21,495 Taxes accrued income and other 15,090 16,851 Interest accrued 18,111 18,426 Dividends declared 15.067 67 Other 4,590 17,591 Total Current liabilities 223,914 199,437 Deferred Credits and Other Liab;11 ties Accumulated deferred income taxes 389,432 367,385 Accumulated deferred investment tax credits 104.715 109,892 Other 41,215 53,289 Total Deferred Credits and Other Liabilities 535,362 530,566 Commitments and Contingencies (Note K)
$2,972,903
$2,967,006 See Notes to Financial Statements.
A-13
l 1
l WISCCallN (LICTRIC POWER CC::PANY l
CAP 11Atl2A110N $f41[MikT q
Decseter 31 l
1990 1989 (Thousards of Dollare) 4 l
Conson Stock (Wity (See Conven $tock twity Statement)
Conven stock ($10 por value; authorized 65,000,000 shares; outsteroin9 33,289,327 shares)
$ 332,893 5 332,8P't Other paid in capite!
142,462 142,462 Retelned earnings 704,969 715,000 Total Coanon stock twity 1,180,324 1,190,355 Preferred Stock + Csmutative
$la Per Cent. Pieterred Stock $100 par vetwe; authorised 45,000 theres; outstarding + 44,508 shores 4,451 4,451 teriet preferr?d st*>ck
$100 par value; authertred 2,360,000 shares; outsterding
- 3.60% Series
- 260,000 shares 26,000 26,000
- Total Preferred Stock Redenotion hot Rewired (Note H) 30,451 30,451 j
6.75% leries - 700,000 shares 70,000 70,000 Total Preferred Stock
- Redenotion Required (Note N) 7bbbb 7bbbb Long term Debt F trat mortgage txwds Series Due 5
1990 26,605 4 3/4%
1991 3,525 3,525
.4 1/2%
1993 4,985 4,985 5 7/8%
1996 36,807 36,607 6 1/2%
1997 11,191 11,191 6 7/8%
1997 37,580 37,580 6 5/C%
1998 9,676 9,757 6 7/8%
1998 13,360 33,360 6.10 1 1999 2008 25,000 25,000 6.25 %
1999 2008 1,000 1,000 7 1/41 1999 38,929 38,929 8 3/B%
1999 39,230 39,230 8 1/2%.
1999 11,678 11,678 6.45 %
2004 12,000 12,000 6 3/4%
2000 59,897 59,897 6.45 %
2006 4,000 4,000 6,50 %
2007 2009 10,000 10,000 8 ~ 4X 2006 79,934 79,934 9 '.,r 4%
2015 46,350 46,350 11 1/2%
2015 2,878 8 1/2%
2016 100,000 100,000 9 5/8%
2018 100,000 100,000 9.85 %
2023 100,000 100,000 9 1/8%
2024 60,000 60,000 825,142 854,706 Debentures (unsecured) 7% Series cbe 1993 24,785 25,560 Note (unsecured).
Varlebte rate due 2016 67,000 75,000 Obligations urder capital lease (hote B) 48,150 45,673 Unemortlied discount. net (6,492)
(6.771)
Long term debt due currently (25, 733)
(47,971) fotel Long Term Debt (Note !)
932,652 946,197 Total Capiteltration
$2,213,627
$2,237,003 See Notes to financial Statements.
A 14
WitCOW$1N ELECTRIC P M R C W M Y COPW W $10CK EQUITY $1ATEMth1 Cceman Stock Connon Stock Other told Retained shores 110 For volve in Capitet tornities totet (1mouserds of Dollars)
Sotence Decenter 31, 1987 33,289,327 1332,893 1142,462
$$69,697 11,045,052 het incone l it, %."
178,949 Cash dividerds Conman atock (95,207)
(95,207)
Pref erred stock (5,928)
(5,928)
Bolence Decenber 31, 1988 33,289,327 332,893 142,462 647,$11 1,122,126 Net incone 100,282 190,282 Cash dividerds Cca mn stuck (116,865)
(1i6,865)
Pref erred stock (5,928)
(5.928)
Botence Decenter 31, 1989 33,289,327 332,893 142,462 715,000 1,190,355 Net,necce 185,918 185,918 Cash dividerds Conmon stock (190,021)
(190,021)
Preferred stock (5,928)
(5,928)
Bolence Decent >er 31, 1990 33,289,327 1332,893 1142,462
$ 704,969
$1,180,324 See Notts to financlet Statements.
a i
I A 15
MISCONSIN ELECTRIC POWER COMPANY NOTES TO flNANCIAL STATEMEN15 A - Summary of Significant Accounting Policies General The accounting records of the company are kept as prescribed by the federal Energy Regulatory Commission (FERC), modified for requirements of the Public Service Commission of Wisconsin (PSCW).
Effective January 1990, the PSCW adopted the iERC Uniform System of Accounts with minor modifications.
The financial statements reflect classifications under this system of accounts.
Revenues Utility revenues are recognized on the accrual basis and include estimated amounts for service rendered but not billed.
fuel The cost of fuel is expensed in the period consumed.
Nuclear fuel expense includes the estimated cost for disposal of spent fuel based on a contract with the U.S. Departm'nt of Energy.
Property Property is recorded at cost.
Additions to and significant replacements of utility property are charged to utility plant at cost; minor items are charged to maintenance expense.
Cost includes material, labor and allowance for funds used during construction (see Note F).
The cost of depreciable utility property, together with removal cost less salvage, is charged to accumulated provision for depreciation when property is retired.
Income Taxes Deferred federal income tax accounting is practiced in respect to significant timing differences. Pursuant to a PSCW order, deferred state income tax resulting from the use of accelerated depreciation has not been recorded. See Note E.
The federal investment tax credit is accounted for on the deferred basis and is reflected in income ratably over the life of the related property.
A-16
1 I
1 Debt Premium, Discount and Expense q
Long term debt premium or discount and expense of issuance are amortized by the straight line method over the lives of the debt issues and included as interest expense.
Unamortized amounts pertaining to reacquired debt are written off currently, when acquired for sinking fund purposes, or amortized in accordance with PSCW orders, when acquired for early retirement.
i Statement of Cash flows Cash and cash equivalents includes marketable debt securities acquired three months or less from maturity.
Supplemental Information Disclosures:
1990 1989 1988 (1housands of Dollars)
Cash Paid for -
Interest (net of amount capitalized)
$ 78,406
$ 81,788
$ 79,455 income taxes 84,383 71,970 108,563 B
Nuclear Operations i
The company has a nuclear fuel leasing arrangement with Wisconsin Electric l
fuel Trust (Trust), which is treated as a capital lease.
The nuclear fuel is leased for a period of 60 months or until the removal of the fuel from the reactor, if earlier.
Lease payments include charges for the cost of fuel burned, financing costs and a management fee.
In the event the company or the Trust terminates the lease, the Trust would recover its unamortized cost of nuclear fuel from the company.
Under the lease terms, the company is in effect the ultimate guarantor of the Trust's connercial paper and line of credit borrowings financing the investment in nuclear fuel.
The amount of nuclear fuel under capital lease and the accumulated provision for amortization at December 31 was $103,443,000 and $60,630,000 for 1990 and 591,050,000 and $50,416,000 for 1989, respectively.
Interest expense on the l
nuclear fuel lease was 53,992,000 in 1990, $3,926,000 in 1989 and $3,654,000 in 1988.
l l
l A-17
_ _. - _.. _. -,...., _. _ _. _. _ ~ _ _ _ _ _ _ _ _.. _. _. _ _ _. -.. _ _. - _ _.
The future minimum lease payments under the capital lease and the present value of the net minimum lease payments as of Occcmber 31, 1990 are as follows:
(Thousands of Dollars) 1991
$ 24,394 1992 16,371 1993 8,894 1994 2,799 1995 932 Total Minimum Lease Payments 53,390 Less: Interest (5,240)
Present Value of Net Minimum Least Payments
$ 48,150 The Price Anderson Act (Act) provides for the payment of funds for public liability claims arising out of a nuclear incident.
The Act provides an industry wide retrospective rating plan, under which nuclear reactor owners could be assessed up to $63 million per reactor (WE owns two), but not more than $10 million in any one year for each reactor, in the event of any nuclear incident.
C - Pension Plans and Other Postretirement Benefits In the opinion of the company, current pension trust assets and amounts which are expected to be paid to the trusts in the future will be adequate to meet future pension payment obligations to current and future retirees.
The plans are funded to meet the requirements of the Employee Retirement income Security Act of 1974. The PSCW recognizes funded amounts for ratemaking, which amounts are charged to expense as paid.
Pension Expense was
$584,000 in 1990, $1,536,000 in 1989 and $4,285,000 in 1988.
The following information has been provided in accordance with Statement of Financial Accounting Standards No. 87. Employers' Accounting for Pensions (FAS 87). The company has several noncontributory pension plans covering all eligible employees. Pension benefits are based on years of service and the employee's com)ensation.
The majority of the plans' assets are equity securities: otler assets include corporate and government bonds, guaranteed investment contracts and real estate.
4 a
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+
n-,---,-n
,m.., - - - -. -
--- +---, -
.. ~,
1990 1989 1988 l
(Thousands of Dollars)
Components of Net Periodic Pension Cost, Year Ended December 31 -
Cost of pension benefits earned by employees 7,092 5 5,770 5,695 Interest cost on projected benefit obligation 25,769 23,892 23,297 Actual return on plan assets (12,254)
(67,725)
(40,975)
Net amortization and deferral (26,655) 33,281 9,672 Total pension cost calculated under FAS 87 5 (6,048)
$ (4,782)
$ (2,311)
Actuarial Present value of Accumulated Benefit Obligation, at December 31 -
Vested benefits. employees' right to i
receive benefit no longer contingent upon continued employment
$ 258,720
$245,909 Nonvested benefits employees' right to receive benefit contingent upon continued employment 4,727 4,759 Total obligation
$ 263,447
$250,668 Funded Status of Plans: Pension Assets and Obligations at December 31 -
Pension assets at fair market value
$ 392,525
$399,936 Projected benefit obligation at present value (324,747)
(305,641)
Unrecognized transition asset (32,819)
(35,259)
Unrecognized prior service cost 12,378 12,442 Unrecognized net gain (44,710)
(75,230)
Projected status of plans 2,627
$ (3,752)
Rates used for calculations (%) -
Discount Rate-interest rate used to adjust for the time value of money 8.5 8.5 9.0 Assumed rate of increase in compensation icvels 5.5 5.5 5.5 Expected long term rate of return on pension assets 9.0 9.0 9.0 In December 1990 the financial Accounting Standards Board (FASB) issued, for adoption by 1993, Standard No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions.
This standard requires the accrual of postretirement benefits other than pensions during the employee's period of service. Although the company has not quantified the effects nor determined the adoption date of the standard, it believes adoption will not have a material effect on results of operations.
Any effects will depend on the treatment of the standard by regulatory commissions.
The_ company provides life insurance for retirees and medical insurance benefits for participating retired employees and their dependents, The cost of these postretirement benefits is expensed when paid and was approximately
$4,342,000 in 1990, $4.827,000 in 1989, and $21,014,000 in 1988.
These amounts include $966,000 in 1990, $1,579,000 in 1989 and $16,900,000 in 1988, which were paid to an Employees' Benefit Trust to fund a major portion of postretirement life insurance benefits for current employees and retirees.
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D Cepreciation Depreciation expense is accrued at straight line rates, certified by the PSCW, which include estimates for salvage and removal costs.
Nuclear plant decommissioning is accrued as depreciation expense based on an external sinking fund method.
Total deconnissioning is astimated at
$248,000,000 in 1990 dollars.
Depreciation as percent of average depreciable utility plant was 4.1% in 1990 and 1989 and 3.9% in 1988.
E - Income Taxes Following is a summary of income tax expense and a reconciliation of total income tax expense with the tax expected at the federal statutory rate.
1990 1989 1988 (khousands of boklars)
Current tax expense
$ 83,473
$ 89,706
$ 77,995 Investment tax credit-net (5,087)
(5,686)
(5,744)
Deferred tax expense 17,507 14,982 21,330 Total tax expense
$ 95,893
$ 99,002
$ 93,581 Income before income taxes
$281,811
$289,284
$272,530 Expected tax at federal statutory rate
$ 95,816
$ 98,356
$ 92,660 State.ncome tax net of federal tax reduction 11,120 11,445 10,543 Investment tax credit restored (5,142)
(5,928)
(6,714)
Other (no item over 5% of expected tax)
(5,901)
(4,871)
(2,908)
Total tax expense
$ 95,893
$ 99,002
$ 93,581 As a result of the PSCW's adoption of the FERC's Uniform System of Accounts (see Note A, General), certain 1989 and 1988 deferred income tax amounts, among other items, in the accompanying financial statements have been reclassified. Most significant was the reclassification of deferred income taxes included in accumulated provision for depreciation to accumulated deferred income taxes.
Pursuant to a PSCW order, beginning in 1991, deferred income tax accounting will be adopted for all federal and state timing differences.
In prior years deferred income tax accounting was applied primarily to significant federal timing differences.
Previously unrecorded deferred income taxes will be recorded ratably over the remaining life of the related property. At December 31, 1990, the cumulative amount of timing differences for which deferred A-20
t;. Income Taxes (Cont'd) income taxes have not been provided was approximately $40 million for federal tax purposes and $349 million for state tax purposes.
Any tax effect of these amounts is expected to be recovered through future utility rates, in 1987 the FASB issued Standard No. 96, Accounting for income Taxes.
This new income tax accounting standard requires an asset and liability approach, the adjustment of deferred income tax balances to reflect income tax rate changes and the recognition of previously unrecorded deferred taxes.
Although the company has not quantified all the effects of adopting the standard, which is currently required by 1992, it is expected that any additional deferred income taxes will be offset primarily by regulatory assets and liabilities representing the expected future revenue impact of these adjustments.
The company believes adoption of the standard will not have a material ef fect on its results of operations.
The company intends to apply the standard prospectively.
F. Allowance for funds Used During Construction (AfDC)
AFDC is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a rate of return on stockholders' capital used for construction purposes.
On the income statement the co of borrowed funds (before income taxes) is a reduction of interest expense and the return on stockholders' capital is an i'3m of noncash other income.
AFDC was capitalized at a rate of 11.13% in 1990, 11.41% in 1989, and 11.29%
in 1988, as approved by the PSCW.
G. Transactions with Associated Companies Managerial, financial, accounting, legal, data processing and other services may be rendered between associated companies and are billed in accordance with service agreements approved by the PSCW.
The company also buys gas from Wisconsin Natural (WN), another subsidiary of Wisconsin Energy Corporation, for electric generation at rates approved by the PSCW.
H. Preferred Stock Serial Preferred Stock authorized but unissued is cumulative, $25 par value, 5,000,000 shares, in the event of default in the payment of preferred dividends or in the mandatory redemption requirements, no dividends or other distributions may be paid on the company's common stock.
Redemption Not Required -
The 3.60% Series Preferred Stock is redeemable in whole or in part at the option of the company at $101 per share plus any accrued dividends.
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H - Preferred Stock (Cont'd)
Redemption Required -
The 6.75% Series Preferred Stock has a redemption requiren'ent of 21,000 shares at par value annually on each June 1 beginning in 1993 (with a noncumulative option to redeem up to 31,500 additional shares annually) with redemption of the remaining shares required on June 1. 2026.
In addition to the mandatory redemption, the company may at its option redeem the stock at $106.75 per share plus any accrued dividends prior to June 1, 1992 and at declining amounts thereaf ter to $100 per share plus any accrued dividends, on or af ter June 1, 2002, 1 - Long Term Debt The maturities and sinking fund requirements through 1995 for the aggregate amount of long term debt outstanding (excluding obligations under capital lease, see Note B) at December 31, 1990 are shown beIow.
1991 5
8,115,000 1992 4,550,000 1993 32,675,000 1994 3,690,000 1995 3,690,000 Sinking fund requirements for the years 1991 through 1995, included in the table above, are 520,210,000, ef which 516,265,000 has been anticipated by the advance purchase of bonds and $2,200,000 may be satisfied by certifying additional mortgaged property.
Substantially all utility plant is subject to the applicable mortgage.
J - Lines of Credit Unused lines of credit for short term borrowing amounted to $101,600,000 at December 31, 1990.
In support of various informal lines of credit from banks, the company has agreed to maintain unrestricted compensating balances or to pay commitment fees; neither the compensating balances nor the commitment fees are significant.
K - Commitments and Contingencies Plans for the construction and financing of future additions to utility plant can bc found elsewhere in this report in Management's Discussion and Analysis of Financial Condition and Results of Operations."
(9 A-22
4. Information by Segments of Business Year ended December 31 1990 1989 1088 (Thousands of Dollars)
Electric Operations Operating revenues
$1,208.045 51,245,701 $1,275,396 Operating income before income taxes 311,130 341,333 332,732 Depreciation 130,970 128,397 117,161 Construction expenditures 174,891 176,327 126,613 Steam Operations Operating revenues 12,126 12,292 12,363 Operating income before income taxes 1,966 2,113 1,831 Depreciation 1,011 947 917 Construction expenditures 1,716 1,669 512 Total Operating revenues 1,220,171 1,257,993 1,287,759 Operating income before income taxes 313,096 343,446 334,563 Depreciation 131,981 129,344 118,078 Construction expenditures (including nonutility) 176,954 178,087 127,143 At December 31 Net Identifiable Assets Electric
$2,951,217 $2,945,900 $2,850,890 Steam 18,698 18,609 17,449 Nonutility 2,988 2,497 2,706 Total Assets
$2,972,903 $2,967,006 $2,871,045 DIRECTORS The information in "Information Concerning Nominees for Directors" appearing on pages 2-4 of Wisconsin Electric's definitive Information Statement dated April 3, 1991, attached hereto, is incorporated herein by reference, OFFICERS The information in "Of ficers" appearing on page 4 of Wisconsin Electric's definitive Information Statement dated April 3, 1991, attached hereto, is incorporated herein by reference.
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100 tist waeonn Annue Teiemone 4 t4 24 M00 f,une it.30 Macunee, WI t,3202 N'r 20 llIllerllOllSe llEPORT Ol' INI)E.I'ENI)ENT ACCOUNTANTS To the llotml of Directors and Stockholders of Wisconsin Electric Power Company In our opinion, l '" accompanying balance sheet and stateinent of capitalization and i
the related state of income, of conunon otock equity and of cash flows present fairly, in all matenal respects, the Gnancial position of Wisconsin Electric Power Cornpany at Decernber 31,1990 and 1989. and the results of its operutions and its cash Dows for each of the three years in the period ended 1)ccember 31,1990, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express all opinion on lliese fIllancial stalethents babell on our audito. We colhlueted our audits of these statements in neconlance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurunee about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessi,3 the accounting principles used and significant estimates mmle by management, and evaluating the metall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed alme.
NO january 23,1991 l
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