ML20073D778
| ML20073D778 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 12/31/1990 |
| From: | CLEVELAND ELECTRIC ILLUMINATING CO. |
| To: | |
| Shared Package | |
| ML20073D774 | List: |
| References | |
| NUDOCS 9104290221 | |
| Download: ML20073D778 (27) | |
Text
.
THE CLEVELAND ELECTRIC ILLEYINAT.:NG COM?ANY 1990 ANN ~UAL REPOR'T A
Subsidiary of Centerior Energy 9104290221 910424 Corpordt/On con noccx coopp/>
1
i 1
1 l
I i
l CONTENTS
.1 About Cleveland Electric 1 Directors 1 Officers 2 Report ofIndependent Public Accountants 3 Summaryof Significant AccountingPolicies 5 Management's Financial Analysis, Financial Statements and Notes 22 liaancial and Stathtical Review 24 Investor Information
- . - . . . . ~ ~ . . - - - - . . - - . - - . - - . . . . - - - . . . - . - . - _ . . - - - .
AllOUT Cl EVELAND El.ECMllC DlitEClOllS The Company, a w holly owned subsidiary of flobert J. Enling. President and Chief
! Centerior Energy Corporation, provides Operating Officer of Centerior Energy electric service to an atea of northeastern Corporation and Centerior Service Company.
Oluo extending 100 nules along the southern shore of Lake Erie from Pennsylvania on the flichard A. .\ filler, Chairman and Chief east through the city of Ason 1.ake on the Executise Officer of Centerior Energy west. The southern boundary of the service Corporation and Centerior Service Company. '
area is approximately 17 miles south of Eake Erie. The complete boundary prescribes an Lyrnan C. Phillips. President and Chief area of about 1,700 square miles. 'lotal Executive Officer of the Company, Chainnan population sen ed is about 1,560,000. .
and Chief Eu cutive Officer of The 'Ibledo Although the principal city in the service E,dison (,,ompany and Executise \, ice area is Cleveland, the Company derises President of Centerior Energy Corporation.
about 74% of its total electric revenue from customers outside of the city. The Company's 4,500 employees sene about 742,000 customers. OFFICEllS President and Chief EXECUTIVE OFFICES Executive Officer . . . . Lyman C. Phillips The Cleveland Electric illuminating Company Vice President &
55 Public Square Chief Financial officer , . . . Edgar ll. Alaugam Cleveland,011 Vice President e, Jr.
(216)622 9800 Controller . .
.. Paul Fred J. Langshy G. llu Ticasuier ... . . . . Gary Af. llankinson M All ADDRESS Secretary . . . . ...E.l.vlePepin P.O. Box 5000 Cleveland, Oll 44101 1
l ARTHUR REPORT OF lNDEPENDENT PusuC ACCOUNTANTS ANDERSEN l To the Share Owners of l The Cleveland Electne Illuminating Company W We have audited the accompanying consohdated In our opinion, the financial statements referred to balance sheet and consohdated statement of above present fairly, in all matenal respects, the Oumulative preferred and preference stock of The financial position of The Cleveland Electnc illuminating Cleveland Electne illuminating Company (a whoHy Company and subsidianes as of December 31,1990 owned subsidiary of Centenor Energy Corporation) and 1989, and the results of their operations and thee and subsidiaries es of December 31,1990 and 1989, cash flows for each of the three years in the penod and the related consolidated statements of income, ended December 31,1990, in conformity with generally retained earnings and cash flows for each of the three accepted accounting pnnciples years in the penod ended December 31,1990 These As discussed further in the Summary of Significant financial statements are the responsibthty of the Accounting Pohcies and Notes 7 and 12 a change Company's management Our responsibihty is to was made in the methods of accounting for income express an opinion on these financial statements based taxes and unbilled revenues in 1988, retroactive to on our audits. January 1,1988.
We conducted our audits in accordance with As discussed further in Note 3(c), the future of generally accepted auditing standards. Those Perry Unit 2 is undecided Construction has been standards require that we plan and perform the audit to suspended since July 1985 Vanous options are being ebtain reasonable assurance about whether the considered, including resuming construction or financial statements are free of matenal misstatement. cancehng the unit. Management can give no An audit includes examining, on a test basis, evidence assurance when, if ever, Perry Unit 2 will go in service supporting the amounts and disclosures in the financial or whether the Company's investment in that unit and statements An audit also includes assessing the a return thereon wi!! ulhmately be recovered accounting ponciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation We beheve that our audits provide a reasonabic basis for our opinion.
Cleveland, Ohio February 12,1991 Arthur Andersen & Co 2
SUMMARY
OF SIGNIFICANT ACCoVNTINo POLICIES GENERAL nuclear fuel disposai c ests are being tecovered through the base rates The Cleveland Electnc illummating Company The Company defors the d:fferences between (Company) is an electnc utikty r,d a wholly owned actual fuel costs and eshmated fuel costs currently subsidiary of Centerior Energy Corporahon (Center!or being recovered from customers through the fuel Enesgy). The Company follows the Uniform System of factor This matches fuel expenses with fuehrelated Accounts presenbed by the Federal Energy Regulatory revenues Commission (FERC) and adopted by The Pubke Utilities Commission of Ohio (PUCO) The financial PRE PHASE IN DEFERRALS OF OPERATING statements include the accounts of the Company's wholly owned subsidianes which in the aggregate are EXPENSES AND CARRYING CHARGES not matenal The PUCO authonted the Company to record, GG The Company is a member of the Central Area deferred charges, operating expenses (including lease Power Coordination Group (CAPCO) Other rnemberS payments, depreciation and taxes) and interest include The Toledo Edison Company (Toledo Echson). carrying charges for Beaver Valley Power Stahon Umt Duquesne Ught Company (Duquesne), Ohio Echson 2 (Deaver Valley Unit 2) from its commerciabin.
Company (Ohio Ed; son) and Pennsylvania Power service date in November 1987 through December Company (Pennsylvania Power) The members have 1988 Af ter the PUCO determined that Perry Nuclear constructed and operate generation and transmission Power P! ant Unit 1 (Perry Unit 1) was considered facihties for the use of the CAPCO companies Toledo "used and useful" in May 1987 for regulatory Edison is also a wholly owned subsidiary of Centenor purposes, the PUCO authonzed the Company to defer Energy. operaung expenses (including depreciation and taxes) for Perry Unit 1 from June 1987 through RELATED PARTY TRANSACTIONS December 1987, when these costs began to be recovered in rates The PUCO also authorized the Operahng revenues. operahng expenses and interest deferrat of interest and equity carrying charoet chatges :nclude those amounts for transactions with sclusive of those associated with operahng enpenses, aff hated companies in the ordinary course of business for Perry Unit I hom June 1987 through December operations, 1987 and the deferral of only interest carrying charges The Company's transactions with loledo Edison are from January 1988 through December 1968 The primanly for interchange power, transmission hne amounts deferred for Perry Unit 1 pursuant to those rentals and jointly owned power pl ant operations and PUCO accounhng orders were included in property, construchon See Notes 1 and 2 plant and equipment through the commerciabin service Centenor Service Company (Service Company), date in November 1987 Subsequent to that date, the third wholly owned subsidiary of Centenor Energy, amounts aeferred for Perry Unit I were rece ded as provides, at cost, management, financial. deferred charges Amorhtabon of these Beaver Valley administrahve, engineenng, legal and other services to Unit 2 and Perry Unit i deferrals (called pre phascan the Company and otner afhhated companies The deferrals) began in January 1989 in accordance with Seruce Company billed the Company $100.0C000, the January 1989 PUCO rate order discussed in Note 192.000.000 and $79.000.000 in 199C,1989 and 6 The amoth7ations will continue over the hves of the 1988, respechvely, for such services related property REVENUES PHASE IN DEFERRALS OF OPERATING Customers are billed on a monthly cycle basis for their energy consumption based on rate schedutos or As discussed in Note 6, the January 1989 PUCO rate contracts authonzed by the PUCO Effective January order for the Company included an approved rate 1, 1988, the Company changed its method of phasein plan for the Company's investments in Perry accounhng to accrue the estimated amount of unbilled Unit 1 and Beaver Valley Unit 2 On January 1,1989, revenues (as defined in Note 12) at the end of each the Company began recording the deferrals of month. operating expenses and interest and equity carrying A fuel factor is added to the base rates for eiectoc charges on deferred rate based investment pursuant to service This factor is designed to recover from the phascon plan. These deferrals (called phase in customers the co;ts of fuel and most purchased deferra's) will be recovered by December 31,1998 power it is reviewed :emiannually in a heanng before the PUCO-DEPRECIATION AND AMORTIZATION FUEL EXPENSE 'ihe cost of property, plant and equipment. except for l
the nucle?r generahng units is depreciated over their l The cost of fossil fuelis charged to fuel expense based estimated useful hves on a straight line basis. The on inventory usage The cost of nuclear .01, including annual straight bne depreciation proviston expressed an interest component, is charged to fuel expense as a percent of average depreciable utihty plant in based on the rate of consumption Estimated future service was 3 3% in 1990 and 3 9% in 1989 and 1988 l
J
The 1990 rate dechned because of a change in depreciation expense under the hability method See deprecation rates attnbutable to longer estimated Note 7 hves for nonnuclear property The PUCO approved this chan0e in depreciation rates effective January 1,1990 DEFERRED GAIN FROM which reduced depreciation expense for 1990 by
$12.070.000 and increased earnings $9,000.000 SALE OF UTILITY PLANT Deprecration expense for the nuclear units is based The Company entered imo a sale and leaseback on the units of production method. In 1990, th transaction in 1987 for the coal-fired Bruce Mansheid Nuclear Regulatory Commission (NRC) approved a Generating Plant (Mansfield Plant) as d:scussed in six year extension of the operating hcense for the Note 2 The transaction resulted in a net gain which Davis Besse Nuclear Power Station (Davis Besse) was deferred 1ho Company !s amortizing the The PUCO approved a change in the units of. apphcable deferred gain over the term of the leases production depreciahon rate for Dans Besse effective under the sale and leaseback agreement The January 1.1990 which recognized the hfe extension amortization and the lease expense amount are This change reduced depreciation expense for 1990 by recorded as other operation ano maintenance cipense
$5.960,000 and increased earnings $4.000.000 Effective July 1988, the Company began the external funding of future decommissioning costs for its INTEREST CHARGES operating nuclear unita pursuant to a PUCO order Cash contributions are made to the funds on a Debt interest reported in the incomo Statement does straight kne basis over the remaining hcensing period not include interest on nuclear fuel obhgations Interest for each unit. Amounts currently in rates are based on on nuclear fuel obhgations for fuel under construction past estimates of decommissioning costs for the is capitahzed See Note 5 Company of $63,000,000 in 1986 dollars for Davis. Losses and gains realized upon the reacquisition or Besso and $44,000,000 and $35,000.000 in 1987 redemption of long term debt are deferred, consistent dollars for Perry Unit 1 and Beaver Valley Unit 2, with the regulatory rate treatment Such losses and respectively Actual decommissioning costs are gains are either amorhzod over the remainder of the expected to exceed these estimates it is expected onginal hfe of the debt issue retired or amortized over that increases in the cost estimates will be recoverable the hfe of the new debt issue when the proceeds of a in rates resulting trorn future rate proceedings. The new issue are used for the debt redemption The current level of esponse being funded and recovered amortizations are included in acbt interest expense from customers over the remaining kcensing periods of the units is approximately $4,000.000 annually- PROPERTY, PLANT AND EQUIPMENT FEDERAL INCOME TAXES Property, plant and equipment are stated at ongina!
cost less any amounts ordered by the PUCO to be The financial statements reflect the habihty method of written off included in the cost of construction ere accounting for income taxes as a result of adopting a items such as related payroll taxes, pensions, fnnge new standard for accounting for income taxes in 1988 benefits, management and general overheads and The habikty method requires that the Company's allowance for funds used dunng construction deferred tax habikties be adjusted for subsequent tax ( AFUDC) AFUDC represents the obtimated rate changes and that the Company record deferred composite debt and equity cost of funds used to taxes for all temporary differences between the book finance construction This noncash allowance is and tax bases of assets and habikties A portion of credited to income, except for certain AFUDC for Perry these tem"orary differences relate to timing NucIcar Power Plant Unit 2 (Perry Unit 2) See Note differences 'at the PUCO usea to reduce poor years' 3(c). The gross AFUM rate was 10 48 % 10 91%
tax expense for ratomaking purposes whereby no and 1123% in 1990, UB9 and 1986, respectively.
deferred taxes were recorded Since the PUCO Maintenance and repairs are charged to expense as practice permits recovery of such taxes from incurred Certain maintenance and repair expenses for customers when they becomo payabio, the not amount Perry Unit 1 and Beaver Valley Unit 2 are being due from customers has been recorded as a regulatory deferred pursuant to the PUCO accounting orders asset in deferred charges discussed above The cost of replacing plant and for certain property, the Company received equipment is charged to the utihty plant accounts. The investment tax credits which have been accounted for cost of property retired plus removal costs, af ter as deferred credits. The amortization of these dedJCling any salvage Value, is charged to thO investment tax credits is reported as a reduction of accumulated provision for depreciation 4
mund reduce eamings by as much as 12M00MO in mat 4AGEMENT's FINANCIAL ANALYSIS 1991, and even more in subsequent years RESULTS OF OPERAtl0NS The Company has agreed to use its best efforts, Overview such as these two mqunts for accounhng ordus, to avoid rate increases in the ) ears immediately following lhe January 1989 PUCO rate order which provided for 1991 LventuaHy. rate increases will be necessary to three rate increases for the Company, as discussed in recognce the cost of our new capitalinvestment and Note 6, was designed to enable us to begin the effect of inflation recovenng in rates the cost of, and earn a f air return Annual sales growth is expected to average about on, our allowed investment in Beaver Valley Urnt 2 and 2% for the next several years contingent on future Perry Unit 1 The rate order improved resenues and economic events pecognizing the Imtations imposed cash how in 1989 and 1990 and is especteo to by these sales projections ano compchtive constraints, continue to improve them in 1991 However as we will utihre our best efforts to minimge future rate discussed more fully in the fourth and fif th paragraphs increases through maomizing our cost reduction and of Note 6, the phase in plan was not designed to quakty of service efforts and exploring other innovative improve carnings significantly because gains in ootions We will concentrate our efforts on retaining revenues from the higher rates and assumed taics customers and adding new ones through innovative growth are initially offset by a corresponding reduction mark eting and service initiatives in the deferral of nuclear plant operating eipenses and carrying charges and ate subsequently offset by the 1990 vs.1989 amortization of such cost deferrals and carrying f actors contr4buting to the 4% increase in 1990 charges operatirig revenues are as follows Despite tM posthve effect the new rates have on g%, ,n gp,, g,m gQ revenues and cash flow and the relatively neutral impact they have on earnings, we face a number of Th M i 000 C30
% vgy, g g, . ..
(25 000 000) other factors which will exert a negahve influence on se n w 0 % t % ,n anu N ong w m % c, (r o00 000) camings in 1991 and beyond These include inflatiori fu oog ooo the current economic recession and competihvo "=
forces. The tatter. coupled with a desire to encourage The major factor accounting for the increase in ecoriomic growth, has prompted the Company in operahng revenues was telated to the January 1989 recent yearb to enter into contracts having reduced rate order The PUCO approved annual rate increases rates with certain large customers 1wo other f actors for the Company of 9% effective in February 1989 and are having a negabve influence on camings first. the 7% offechve in february 1990 The associated Company is currently recording depreciation on revenue increase in 1990 was parhatty offset by nuclear units at a higher level than that which is reduced revenues resulting from a 21% decrease in reflected in rates because of the good performance of total nulowatt hour salet Industnal sales decreased the units over the last several years. SeCond with 2 6% because of the recession beginning in 1990 respect to f acihties placed in service atter f ebruary Residential saleb decreased 15% as seasonal 1988 and not included in rate base, the Company is temperatures were more moderate in companson to currently required to record interest charges and the poor year s temperatures, resulbng in reduced depreciation as current expenses even though such customer heating and cochng related demand items are not yet reficcted in rates Commercial sales in :reased 0 5% as increased We are taking several steps to counter the adverse demand from new all liectric office and retail space effects of the factors discussed above We are was offset by the effec's of mild weather The increase implementing the rnanagement audit in revenues was also partially offset by the loss of recommendations discussed in the sixth paragraph of revenues related to the May 1989 expiration of the Note 6 which are expected to reduce operating Company's agreement to sell a pothon of its share of empenses by about 164.000.000 annually We have Perry Unit 1 capacity to Ohio Edison and Pennsylvania already shared S0% of the expected savings with Puwer customers by reducing the 1991 rate increase granted Operating expenses increased 0 2% in 1990 under the 1989 rate order. However, continuing cost caused mainly by lower nuclear operating expense reduction efforts will be necessary to help offset the deferrals for Perry Unit 1 and Beaver Valley Unit 2 effect of inflahon Also, the Company is sechng pursuant to the January 1989 PUCO rate order and by PUCO approval to accrue nuclear plant depreciation at an increase in taxes, other than federal income taxes, a level which is more closely akgned with the amount resulting from higher property and gross receipts currently being recovered in rates by switching to the taxes These increases in operating expenses were straight kne method The Company also will seek partially o!! set by a decreate in depreciahon and approvat to accrue post in service interest carrying arnorblation e> pense primarily because of lower charges and defer depreciation charges for faciktics depreciation rates used in 1990 for nonnuclear that are in service but not yet recognized in rates property and Davis Besse atthbutable to longer Inabikty to obtain approval of the first accounting eshmated hves and because of longer nuclear request would reduce camings by as much as generahng unit refuehng a.id maintenance outages in .
$35.000.000 in 1991, and more or less in subsequent 1990 than in 1989 Federal income taxes decreased years, depending on the performance of tne units pomanly because of a decrease in protax operating inabihty to obtain approval of the second request income
. . . . ......mm
Credits for carrying charges recorded in rnetals and automotive customers Sales to other nonoperating income decreased m 1990 because a industrial customers increased 2 6% The decrease in greater share of out invettments in Perry Unit 1 and rnenues from sales to Ohio EGson and Pennsylvania Beaver Vahey Unit 2 were recovered in rates The Power was the result of the May 1989 espnation of the decrease in the federalincome tax provision related to Compand agreernent to sell a portion of its share of nonoperating income was the result of a decrease in Perry Unit 1 capacity pretas nonoperating income and federal income tas Operating cipenses increased 9 2% in 1989 Lower adjustments of $18,712.000 associated with deferrals of nuclear operating expense for Perry Unit 1 previously deterred investment tax crests relating to and Beaver Va! ley Un;t 2 resulted in a $$6 000.000 the 1988 wnte-off of nuclear plant Interest e> pense increase in e(pense f uel and purchased power increased in 1990 because of the higher level of debt enpense increased largely because of the matching of outstanding whch was partially offset by refinancings empense with higher fuel cost recovery revenues escuss d in h preceeng pa'agraph tmproved 1989 vs.1988 nucicar unit availabiktv enabled the Company to sell Factors contnbuting to the 9 7% increase in 1989 power to other utilities The excess of revenues over operating revenues are as follows cost is treated as a reduction !n purchased power chanpc in Opsting nevenues joenease ) cupense which cushioned the increase in fuel and l
' ~isc Raies and Mmenaneous . t t t 2 000.000 purchased power enpense for the year Depreciation i Deim ed c Wir nevenues 43 000 000 cipense increased ref'ective of the increased l h$ uNN III .
Sale 6 to Ohio t dison and Pennsylvama r%er js2 000_000 )
generation from the Company s nuclear units since their depreciation is recorded based on units.of-
$ 140 00_0 000 production The January 1989 rate order for the Company was increased in 1999 because the phase in and pre- <
pnmarity responsible for two major factors impacting phase in carrying charges recorded in 1989 were the increase in revenues The PUCO granted the greater than the pre-phase in carrying charges I Company a 9% rate increase effectwe in February recorded in 1988 Interest expense increased in 1969 1989 The increase in revenues attnbutable to deferred tiecause of the higher level of debt outstanding.
construction work in progress (CWIP) revenues in Preferred and preference dividend requirements 1989 resulted frorn the reduction in the amount of decreased in 1989 because of stock redemptions delerted credits for the mntor CWlP refund obligations to customers Fuel cost recovery revenues increased EFFECT OF INFLATION in 1989 because of a significant nse in the fuel cost recovery factors compared to 1988 The lower 1988 Although the rate of inflation has cased in recent years, factors recognized a greater amount of refunds to we are still affected by even modest inflation since the customers ordered by the PUCO for certain regulatory orocess introduces a time lag dunng which replacement fuel and purchased power costs collected increased costs of our labon matenals and services are from customers dunng a 1985 1986 Davis-Besse not reflected in rates and fully recovered Moreover, outage Total kilowatt hour sales decreased 2 3% in regulation allows only the recovery of histoncal costs 1989 The comparatively moderate summer weather in of plant assets through depreciation even though the 1989 lowered sales because of reduced air costs to replace these assets would substantially conchtioning usage Residential saios decreased 1.3% esteed their histoncal costs in an inflationary economy Commercial saios increased 4 2% as a result of Changes in fuel costs do not affect our results of continuing growth from new office buildings and retail operations since those costs are deferred until outlets Industnal sales decreased 2 6% pnncipally reflected in the fuel cost recovery factor included in because of an 8 5% reduction in sales to large pnmary customers' bilis RETAINED EARNINGS mt cuvnAND t acTnic uUMNATING COMPANY AND SUBSIDIAnil$
For the years ended December 31, 1990_ 1989 1988 (thousands Of d0ilar$)
Balance at Beginning of Year $ 507,375 $ 459 7_09 i 604 516 Additions Net income . 242,328 250.219 95.085 Deductions Dwidends declared Common stock (149,199) (161.66 0 (198,445)
Preferred stock . . (36,205) (40,769) (41,203)
Preference stock . . -
(124) (638) g Other, pnmanly preferred stock redemption expenses . J740) 2 394 Net increase (Decrease) 56d84 47 666 (144.807)
Balance at End of Year . $ 563,559 $ 507.375 1 459.709
= = = = = == --
The accompanying notes and summary of significant accounting pohcies are an integral part of this statement 6
__ __ __. ~_ . _ _ _ _.___ _ _ _ _ _ _ _ _ _
lNCOME STATEMENT w cttvtLAND i d C1f0C luVWN ATING COWANY AND SUBSIDIARit$
For the years ended December 31, 1990 1989 1988 (ih')JWidS Of dallAf $)
$1655,844 $1.591.662 $1.451,578 Operating Revenues ,
1 Operating Expenses 377,082 384,543 307,014 Fuel and purchased power (1) .
514,186 508.151 524,478 Other operation and maintenance .
Depreciation and amortization ,
175,654 193.279 189.731 Taxes, other than federal income taxes 197,454 103,120 184,813 Phase in deferred operating expenses (33,960) (52,020) -
Pre phase in deferred operating expenses. . 3,948 3.888 (104,396)
Federal income taics . . . . 75,099 85.275 94.654 1 309,463 1 306,236 1,196,294 Operating income . .. 346,381 285.426 255.284 Nonoperating income Allowance for equity funds used dunng construction. 4,531 8,362 8.052 Other income and deductions, not 1,836 7,934 14.103 Wnto off of nuclear costs. . .
- - (257,400)
Phase In carrying charges . 161,598 216,851 -
Pro phase in carrying charges - 17,937 224,585 Federal income taxes - credit (expense) _ {20,401) (55,699) 53,162 147,564 195.385 42,502 income Before Interest Charges 493,9_45 480.8_11 297,786 Interest Charges 254,936 238.042 228,879 Debt interest , ,
Allowance for borrowed funds used dunng construction. (3,319) _ (7A50) (4,304)
_25L61] 230 592 224.575 Income Before Cumulative Effect of an Accounting 242,328 250,219 73,211 Change . . .. .
Cumulative Effect on Prior Years (to December 31,1987) of an Accounting Change for Unbilled Revenues (Net of income Taxes of $14,552,000) . . .
2M74 242,328 250.219 95,085 Net income . . .
Preferred and Preference Dividend Requirements. 40,227 42,506 36f82 Earnings Available for Common Stock , . y05,6j6, $_209 992 .$_ 52.,579 (1) includes purchased power expense of $102,773.000, $104.127,000 and $31,774,000 in 1990,1989 and 1988, respectwely, related to capacity purchases from Toledo Edison.
The accompanying notes and summary of significant accounting pohcies are an integral part of this statement.
l l
7
MANAGEMENT'S FINANCIAL ANALYSIS CAPITAL RESOURCES AND LIQUIDITY redemption requirements of approximately
$267,000,000 We expect to finance externally about We continue to need cash for an ongoing program of 50% to 60% of our 1992 and 1993 requirements, if constructing new f acilities and modifying existing economical, we may also redeem additional secunties facihties to meet anticipated demand for electnc under optional redemption provisions See Notes service, to comply with governmental regulations and 10(c) and (d) for information concerning limitations to improve the environment. Cash m also needed for on the issuance of preferred and preference stock and mandatory retirement of securities Over the three, debt.
year penod of 1988 1990. these construction and Our capital requirements will increase af ter 1994 as mandatory retirement needs totaled approomately
$775.000,000 in addition, we exercised vanous a result of the Clean Air Act of 1990 (Clean Air Act).
Our future capital spending will depend on the options to redeem and purchase approomately implementaten strategy we choose to achieve
$400,000.000 of our secunties. comphance with the ne v law See Note 3(b)
Dunng the 1988-1990 penod, the Company issued we expect to be able to ra<se cash as needed The
$356.430.000 of first mortgage bonds and obtained availabihty of capital to meet our extemal financing
$56.000,000 of term bank loans In 1989 and 1990, needs, however, depends upon such factors as the Company also issued $550.000,000 of secured financial market conditions and our credit ratings medium term notes The Company utilized its short, Current secunhes ratings for the Company are as term borrowing arrangements (explained in Note 11) fonows:
which resulted in the Company having $87,110,000 of commercial paper and $17,000,000 in notes payable {ap py,o s to affikates outstanding at December 31, 1990 corronoon service Proceeds from these financings were used to pay our First rnortgage bonds BDB- Baa2 construction program costs, to repay portions of Preened stock . BB+ baa2 short term debt incurred to finance the construction program, to retire, redeem and purchase outstanding secunties, and for general corporate purposes A wnte off of the Company's investment in Perry The Company was granted rate increases effective Unit 2, as discussed in Note 3(c), would not reduce in 1989,1990 and 1991 pursuant to the January 1989 retained earnings sufficiently to impor the Company's PUCO rate order See Note 6 for a discussion of the ability to declare dividends and would not affect cash rate order which provides for specific levels of rate flow.
increases through 1991. Although the rate order The Tax Reform Act of 1986 (1986 Tax Act) required us to wnte off certain assets in 1988 which provided for a 34% income tax rate in 1988 and lowered our earnings base, our current cash flow was thereaf ter, the repeal of the investment tax credit, not impaired Internally generated cash increased in scheduled reductions in investment tax credit 1989 and 1990 from the 1988 level as a result of the carryforwards, less f avorable depreciation rates, a new rate increases. alternative minimum tax ( AMT) and other items Estimated cash requirements for 1991 1993 are lhese changes had no significant cash flow impact in
$605.000,000 for our construction program and 1988 because we had a not operatii g loss for tax
$515.000,000 for the mandatory redemption of debt purposes However, the changes resutted in increased and preferred stock We expect to finance externally tax payments and a reduction in cash flow dunng about 33% of our 1991 construction and mandatory 1989 and 1990 because we were subject to the AMT.
h
CASH Flows w ca vamo tu eme uu,-c cww mo sunsoAms For ttje years ended December 31, u m,m,a $ wsC Cash Flows from Operating Activities (1)
Net income , $ 242,328 $ 250.219 $ 95.085 Adjustments to Reconcile Net income to Cash from Operating Activities-Depreciation and emortization 175,654 193 279 189.731 Deferred federalincome taxes 111,029 108.261 18.650 investment tax credits, net (17,224) (58) (10.607)
57,400 Wnto off of nuclear costs.
Deterred and unbilled revenues (38,134) (32,168) 9 200 Deferred fuel (11,410) 8.827 (33,908)
Carrying charges capitalized. (161,598) (234,788) (224.585) 47,028 55.712 44,911 Leased nuclear fuel amortization Defened operating expenses, net (30,012) (48,132) (104,396)
Allowance for equity funds used dunng construction. (4,531) (8 362) (8.052)
Amortization of reserve for Dav!s-Besse refund otngations to customers . , .
- (12,162) (20,341)
Pension settlement gain. , (34,517) - -
Cumulative effect of an accounting change. - -
(21,874)
Changes in amounts due from customers and others, net (16,878) (9.251) (7,967)
Changes in inventones . (22,494) (4,919) 9,379 Changes in accounts payable 39,051 (6,694) 45.601 Changes in working capital affecting operations. (5,195) 29.504 5.825 Other noncash items _ (16,275) _J 16 215) __(17,657 )
Total Adjustments . 14,494 22 834 131.310 Net Cash from Operating Activities . 256,822 273 053 226 395 Cash Flows from Financing Activities (2)
Bank loans, commercial paper and other short term debt 86,688 29 (36,555)
Notes payable to affiliates . (157,200) 90,200 73,000 Debt issues First mortgage bonds. 100,000 67,700 188,730 Secured medium-term notes. 337,500 212,500 -
Term bank loans . ,
16,000 40.000 -
Equity contnbutions from parent ,.
(95)
Matunties, redemptions and sinking funds . (211,810) (305,741) (162.411)
Nuclear fuellease and trust obligations (56,129) (47,574) (44,911)
Dividends paid. (185,851) (202,444) (241,422)
Premiums, discounts and expenses (5j15) (1.697) 1313)
Net Cash from Financing Activities _ (76,317) J147.027 ) _(_223J77 )
Cash Flows from investing Activities (2)
Cash applied to construction (156,769) (158,585) (199,983)
Interest capitahzed as allowance for borrowed funds used dunng construchon , (3,319) (7,450) (4,304)
Loans to affi!iates . ., ..
(11,000) - -
Cash withdrawn from sale and leaseback and other trusts - -
264.109 Other cash received (apphed) (6_,699 ) J7.298) 510 Net Cash from investing Activities . _(177,787) (173 333) 60.332 Net Change in Cash and Temporary Cash investments. 2 t718 _ (47.307) _
62J50 Cash and Temporary Cash Investments at Beginning of Year. 28,330 75 637 12.887 Cash and Temporary Cash investments at End of Year Sj1g8 $ J 330 $
73 637 (1) Interest paid was $244,000.000, $240,000,000 and $224.000.000 in 1990,1989 and 1988, respectively income taxes paid were $18.589 000, $29.106.000 and $84.007.000 in 1990,1989 and 1988, respectively.
(2) Increases in nuclear fuel and nuclear fuellease and trust obhgations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement I
The accompanying notes and summary of significant accounting pohcies are an integral part of this statement 9
l l
BALANCE SHEET l
December 31, 1990 1989 i onousar,ds of daliam ASSETS l PROPERTY, PLANT AND EQUIPMENT Utility plant in service . . . . . . ,. . .. .. $6,041,878 $5,878.825 Less: accumulated depreciation and amortization _1 t410,051 1.264.570 4,631,827 4.614,255 Construction work in progress . . 175,232 203.639 Perry Unit 2 .... .. . .. . . . . . . 521,464 523 294 5,328,523 5.341,188 Nuclear fuel, not of amortization. . . ... . . . 300,824 309.182 Other property, less accumulated depreciation. . . 43 428 45.192
_5,672,775 5.695,562 CURRENT ASSETS Cash and temporary cash investments. . . ... . 31,048 28.330 Amounts due from customers and others, not . 179,184 162.320 Amounts due from affiliates. . . .. . . .. . . . . 19,542 6.252 Unbilled revenues . . . . . . . .. . . 60,700 55.193 Matenals and supphes, at average cost . . . . .. . 76,092 56.481 Fossil fuel inventory, at average cost .. . . . . . 37,000 34,117 Taxes applicable to succeeding years . . 155,069 145.668 Other......., ...... . . .. . 6,92_6 9.312 565,561 497,673 DEFERRED CHARGES Amounts due from customers for future federal income taxes . . . 671,450 681.809 Unamortized loss on reacquired debt . . . . .. . .. . 53,160 47.460 Carrying charges and operating expenses, pre phase in . ... 379,575 363,327 Carrying charges and operating expenses, phase in . .. . . 464,434 268.871 Other . . . .. .. . .. .... .. . 138,202 95.503
_1,706f21 1,477.170 Total Assets . ... . . .. . $7,945,157 $7,670,405
==== ====a The accompanying notes and summary of significant accounting policies are an integral part of this statement.
10
- . . q THE CLEVELAND LLICihlC LLUMiNATING COMPANY AND SUBSIDIA4lLS December 31, i 1990 1989 i
tthout. ands of daltars)
CAPITALIZATION AND LIABILITIES CAPITAllZATION Common shares, without par value: 105.000,000 authorized.
79.591,000 outstanding in t 900 and 1989 . . . . . . . .. 81,242,074 $1.242.074 Other paid in capital . . . . . . . .... ... . . . . . . 78,625 78.625 Retained earnings . . . . . . . . . . . . . . . . . . . ............ .. ... ,
563,559 507,375
- l. Common stock equity . .... .. ... . ......., .. 1,884,258 1,828.074 Preferred stock:
With mandatory redemption provisions . . . . . . . . . . . ..... .... 171,162 212,362 Without mandatory redemption provisions . . . . . . . . . . . . .. . 217,334 217.334 i Lon g t e r m d e b t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 2 6319y _2.336.379
_4,904,665 4,594,149 OTHER NONCURRENT LIABILITIES, primanly nuclear fuellease oblig a tion s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... .. _ 279,850 305,328 )
CURRENT LIABILITIES Current portion of long term debt and preferred stock .. ... . . 97,988- --102.836-Current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . . , 64,554 56.577 .
Notes payable to banks and others. . . . . . ... ..... ... . ... 86,894 206 !
Account s pa yable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . 177,963 138.912 Accounts and notes payable to affiliates . . . . . . . . . .. ...... 59,884 211.971 Acc rued t a xes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,666 233.531 Accrued interest , . . . . . . . . . . . . . . . . . . . . .................. 53,113 45.157 Dividends declared . . . . . . . . . . . . . . . . . . .,.. ......... ... 12,560 13.006 l Accrued payroll and vacahons . . . . . . . . . . . . . . . . . . . . . . . . . . , 17,042 17.638 Current portion of refund obligations to customers . . , . . . . . . . . . . -
32.627 Other....,...................... .. ......... ... 8895 8.62 803 t7,59 861,068 DEFERRED CREDITS Unamortized investment tax credits . . .. . ...... . .... ... 252,759 278.576 ,
Accumulated deferred federal income taxes . , . . . . . . . , . . . . . . . 1,159,199 1.057,189 l Reserve for Perry Unit 2 allowance for funds used during l
. c on s t r uc t ion . . . . . . . . . . . . . . . . . . . . . , . . , . . . . . . . . . . . . . . . 124,398 124,398 Unamortized gain from Bruce Mansfield Plant sale. , . . . . . . . . . . .389,658 408.268 Other.., .. ... .. ... .. ... . . ... . . . . ... . 30,869 41.429 1,956d83 1,909,860-Total Capitalization and Liabilities . . . . . . ...,. .... _87,945 1 1_57, g670.405 =
11
STATEMENT OF CUMULATIVE THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBLIDIARIES PREFERRED AND PREFERENCE STOCK 1990 Shares Current Decemtwt 31.
Outstandino Call Price 1990 1989 (thousands of dollars)
Without par value, 4,000,000 preferred shares authonzed; and without par value, 3.000.000 preference shares authorized, none outstanding Preferred, subject to mandatory redemption'
$ 7 35 Series C . ... . . 180,000 $ 101.00 $ 18.000 $ 19.000 88 00 Senes E . . . . . . . . . . . . . 30.000 1.034 43 30,000 33,000 75 00 Senes F . . . . .... 2.384 1.000.00 2,384 2.384 80 00 Senes G . . . . ..
- - - 800 145.00 Senes H ........ .. - - - 14.244 145 00 Series t . . . , . . . . . . . . . 13,770 - 13,779 17.717 113 50 Senes K . . . . . . . . . . . 10,000 - 10,000 10,000 Adjustable Senes M . . . . . .. 500.000 103.00 49,000 49.000 9.125 Senes N . . . . . . . . . . . 760.000 106 08 73,968 73.968 197,131 220.113 Less: Current matunties 25,969 7,751 Total Preferred Stock, with Mandatory Redemption Provisions $10d62 $212.362 Preferred. not subject to mandatory redemption:
$ 7.40 Senos A. . . . . . . . . . . . 600.000 101.00 5 50,000 $ 50.000 7.56 Senes B. . . . . .. ... 450.000 102.20 45,071 45,071 Adjustable Ser;cs L . . . . . . . . . . . 500.000 103.00 48,950 48,950 Remarketed Scrits P. . . . . . . .. 750 100.000.00 73,313 73.313 Total Preferred Stock, without Mandatory Redemption Provisions $17,334 $217.334 ,
The accompanying riotes and summary of significant accounting pohcies are an integral part of this statement.
12
Notes To THE FINANCIAL STATEMENTS (1) PROPERTY OWNED WITH OTHER UllLITIES AND INVESTORS lhe Company owns. as a tenant in common with other utshties and those ingestors who are owner-parhcipants in various sale and teaseback transactions (Lessors), certain generating units as listed below Each owner owns an undivided share in the enbre unit. Each owner has the nght to a percentage of the generahng capabihty of each unit equal to its ownership share Each utihty owner is obhgated to pay for only its respectwo share of the construction and operahng costs Each Lessor has leased its capacity nghts to a utility which is obligated to pay for such lessor's share of the construchon and operating costs The Company's share of the operahng expense of these generat ng units is included in the incomo Sta'ement Property, plant and equipment at December 31.1990 includes the following facthties owned by the Company as a tenant in common with other utthties and Lessors in Ownership P wit Construc ten ,
Ser vg e Owner ship Mega Powei in WoS Acc umulated Generating Unit Doc Shre natts Sour ce Serec c inPro7ess_ Depreeston in Seroce (thousamis of dalla s)
Senoca Pompr d Swap 1970 80 00 % 300 m vo $ 58 344 $ 554 $ 19 527 Lastiake Unit 5 . 1972 6H Bu 411 Us 154 $89 1099 -
Daws Desse 1977 L138 452 Nude, r 640 948 37 05'i 131 BDI Pert, Unit i and Camman I aal, ties 1987 31 11 37t Nucicar 1 606 310 5845 ISS 529 Deaver valiey Umt 2 and Common f aatties (Note 2) 19847 24 47 201 Nucier 1 108 053 5207 100.183 Constnxtton Suspended (Note 3(C))
Pony Unit 2 Untertain 31 11 375 Nuclear _
$21404 ,
$3 034 844_ $. $_7._1 8 2_4 $_427 040 Depreciation for Eastlake Unit 5 has been accumulated with depreciable property for all generating units rather than by specific generahng unita Ohio Ed: son and Pennsylvania Power purchased 80 megawatts of the Company 5 capacity entitlement in Perry Unit I from November 1987 througn May 1989 Revenues from this transachon were $31.631,000 and $84.068.000 in 1989 and 1988. respectively (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaneback transactions The Company and Toledo Edison are responsible completed in 1987, the Company and Toledo Edison under these leases for paying all taxes, insurance arc co lessees of 18 26% (150 megawatts) of Beaver premiums. operstion and maintenance costs and all Valley Unit 2 and 6 5% (51 megawatts), 45 9% (358 other similar costs for their interests la the units sold megawatts) and 44 38% (355 megawatts) of Units and leased back The Company and Toledo Edison 1,2 and 3 of the Mansfield Plant, respectively, all for may incur additional costs in connection with capital terms of about 29W years improvements to the units The Company and Toledo As co lessee with Toledo Edison, the Company is Edison have options to buy the interests back at the also obhgated for Toledo Edison's lease payments If end of the leases for the fair market value at that time Toledo Edison is unable to make its payments under or to renew the leases Additional lease provisions the Mansfield Plant and Beaver Vahey Unit 2 leases, provide other purchase options along with conditions the Company would be obhgated to make such for mandatory termination of the leases (and possible payments No payments have been made on behalf of repurchase of tne leasehold interests) for events of Toledo Edison to date. def ault. These events of default include Future minimum lease payments under these noncomphance with several financial covenants operating leases at Decen,ber 31. 1990 are affecting the Company. Toledo Edison and Centenor summarized as follows- Energy contained in an agreement relating to a letter of f
c fy] credit issued in connection with the sale and leaseback of Beaver Valley Unit 2, as amended in ormans cr ears) 1989 See Note 10(d) 5 Toledo Edison is selhng 150 megawatts of its
)) 5 1993l 63 000 111.000 Beaver Valley Unit 2 leased capacity entitlement to the 1994. 63.000 1:1 000 Company This sale commenced in Novemoer 1988 1995. 63 000 1110nn and we anticipate that it will conhnue at least until L.ater Years $1579 000 $2 592 000 1998 purchased power expense for this transaction
]^]'QQm 3 gg4 999 $3 upgog was $102.773,000, $104.127.000 and $18,533.000 in 1990,1989 and 1988. respect voly In 1988, a port on Semiannuallease payments conform with the payment ( $ 16.061,000 ) of the purchased power expense was schedule for each lease. recorded in a deferred charge account pursuant to a Rental expense is accrued on a straight.hne basis PUCO accounting order This amount is being over the terms of the leases The amounts recorded by amortized to expense over the hfe of the lease the Company as rental evpense for the Mansfield beginning in 1989 The future minimum lease payments Plant leases were $70.008.000 in both 1990 and 1989 associated with Beaver Valley Unit 2 aggregate and $60,010.000 in 1988 $ 1,936.000.000.
B J
(3) CONSTRUCTION AND CONTINGENCIE0 Beginni- a July 1985, Perry Unit 2 AFUDC was credited to a deferred income account until January 1, (a) CONSTRUCTION PROGRAM 1988, when the practice was discontinued The estimated cost of the Company's onstruction (d) SUPERFUND StTES program for the 1991 1993 period is ;48,000,000,
? including AFUDC of $43,000,000 at excluding The Comprehensive Environmental Response, nuclear fuel. Compensation and Liability Act of 1980 as amended (Superfund) estabbshed programs addressing the cleanup of hazardous waste disposal sites, emergency (b) CLEAN AIR LEGISLATION preparedness and other issues The Company is ihe Clean Air Act will require, among other thing 5, aware of its potential involvement in the cleanup of significant reductions in the emission of sulfur dioxide seven hazardous waste sites We believe that the and nitrogen oxides by the Company's fossil fueled ultimate outcome of these matters wilt not have a electric generating units. The Clean Air Act will require material adverse effect on the Company's financial
= that sulfur dioxide emissions be reduced in two condition or results of operations.
a phases over a ten year period. Centerior Energy's prehminary analysis indicates that comphance with the Clean Air Act may require additional aggregate capital (4) NUCLEAR OPERATIONS AND
!-- expenditures by the Company af ter 1994 in the range CONTINGENCIES of $370,000,000 to $665.000,000. Comphance also is expected to result in somewhat higher fuel and (a) OPERATING NUCLEAR UNITS operation and maintenance expenses in phase one and The Company's interests in nuclear units may be even higher operation and maintenance expenses in impacted by activities or events beyond the
, phase two (efter 1999)- Company's control Operating nuclear generating un'ts The aggregate rate increases needed to fund have expenonced unplanned outages or extensions of -
2 comphance with the first of th3 two phases could be in scheduled outages because of equipment problems the range of 2% to 4% by 1999. Total comphance or new regulatory requirements A major accident at a costs of the Clean Air Act for both phases could result nuclear facihty anywhere in the world could cause the in aggmgate rate increases in the range of 7% to 8% NRC to amit or prohibit the operation, construction or by 2004. A more specific comphance cost estimate hcensing of any nuclear unit. If one of the Company's will become available when Centerior Energy's nuclear units is taken out of service for an extended comphance strategy for the Company and Toledo period of time for any reason, including an accident at Edison is further developeo such unit or any other nuclear facility, we cannot We beheve that Ohio law would permit the recovery predict whether regulatory authonties would impose of comphance costs from customers in rates. unfavorable rate treatment such as taking the Company's affected unit out of rate base. An extended (c) PERRY UNIT 2 outage of one of the Company's nuclear units coupled with unfavorable rate treatment could have a matenal Perry Unit 2, including its share of the common adverse effect on the Company s financial position and facihties is over 50% complete. Cocstruction of Perry r suus of operations Unit 2 was suspended in 1985 oy the CAPCO companies pending future consideration of vanous options. including resumption of full construction with a (b) NUCLEAR IN3URANCE r
revised estimated cost and completion date or The Pnce Anderson Act hmits the habikty of the owners cancellation. No option may be implemented without of a nuclear power plant to the amount provided by the approval of each of the CAPCO companies private insurance and an industry assessment plan In Duquesne, a 13.74% owner of Perry Unit 2, has the event of a nuclear incident at any unit in the advised the Pennsylvaria Pubke Utikty Commission United States resulting in losses in excess of the ievel that it will not agree to resumption of construction of of private insurance (currently $200,000,000), the Perry Unit 2. The NRC construction permit for Perry Company's maximum potential assessment under that h Unit 2 expires in November 199 t The Company, which is responsible for the construction of Perry Unit 2, plan (assuming the other CAPCO companies were to contnbute their proportior ate share of any plans to apply for an extension of the construction assessment) would be $70,754,000 (plus any inflation
, permit pnor to the expiration date. Under NRC adjustment) per incident, but is limited to regulations, this action will cause the construction $10,696,000 per year for each nuclear incident.
permit to remain in effect while the apphcation is The CAPCO companies have insurance coverage pending. for damage to property at Davis Besse, Perry and if Perry Unit 2 were to be canceled, then the Beaver VrJiey (including leased fuei and clean up Company's net investment in Perry Unit 2 (less any tax costs). Coverage amounted to $2,325,000,000 for saving) would have to be y ritten off. We estimate that each site as of January 1,1991. Damage to property such a wnto off, based on the Company's investment could exceed the insurance coverage by a substanhal in this unit as of December 31,1990, would have been amount. If it does, the Company's share of such about $268.000,000, atter taxes. See Note 10(d) for excess amount could have a matenal adverse effect on d a discussion of other potential consequences ('such the Company's financie! condition and results of
. a wnte off. operations.
H
The Company also has insurance coverage for the and 1991, respectively. The 6% increase effective incremontal cost of ary replacement power purchased February 1,1991 has been reduced to 4 35% as (over the costs which would have been incurred had discussed below the units been operating) af ter the occurrence of The annualized revenue increases in 1989 and certain types of accidents at the Company's nuclear 1990 associated with thc rate order were units The amounts of the coverage are 100% of the $120,700,000 and $105.700.000. respectively in estimated incremental cost por week aunng the 52- 1991, the estimated annualized revenue increase week penod starting 21 weeks af ter an accident,67% resulting from the order, a adjusted, is $71400.000.
cf cuch estimate per week for the next 52 weeks and The January 1989 rate order provided for the 33% of such estimato pes week for the nex' 52 weeks permanent exclusion from rate base of a portion of the The cost and duration of replacement power could Company's investment in Perry Unit I and Beaver substantially exceed tha insurance coverage Valicy Unit 2 The exclusion resulted in a wnte off by the Company of $212.000.000 ($140.000,000 af ter tax) in 1988. Since the order effectively eliminated the (5) NUCLEAR FUEL possibihty of the Company recovering its remaining The Company has inventories for nuclear fuel which investment in four nuclear construction projects should provide an adequate supply into the mid 1990s cancelod in 1980 and recovenng certain deferred Substantial additional nuclear fuel must be obtained to expenses for Davis Besse. addihonal write offs totaling supply fuel for the remaining useful lives of Davis- $45.000.000 ($28.000.000 af ter tax) were recorded Besse. Perry Unit I and Beaver Valley Unit 2 More by the Company in 1988. bnnging the total write off of nuclear fuel would be required if Perry Unit 2 were nuclear costs as a consequence of the order to completed. $257,000.000 ($168.000.000 af ter tax)
In 1989, existing nuclear fuel financing The phasein plan under the January 1989 rate arrangements for the Company and Toledo Edison order was designed so that the three rate increases, were refinanced through leases from a special purpose coupled with then projected sales growth, would corporation The total amount of financing currently provide revenues sutticient to recover all operating availabio under these lease arrangements is expenses and provide a fair rate of retum on the
$609,000,000 ($309,000,000 from intermediate term Company's allowed investment in Perry Unit 1 and notes and $300,000,000 from bank credit Beaver Valley Unit 2 for ten years beginning January 1, arrangements), although financing in an amount up to $ 989. In the early years of the plan, the revenues were
$900.000,000 is permitted The intermediate-term e,pected to be less than that required to recover notes mature in the renod 1993 1997. Beginning in operating expenses and prov;de a fair return on 1991, the bank credit arrangements are cancelable on investment. Tnerefore, the amounts of operating two years' notice by the lenders As of December 31, expenses and retum on investment not currently 1990, $314,000,000 of nuclear fuel was financed for recovered are deferred and capitalized as deferred the Company. The Company and Toledo Edison charges Since ine unrecovered investment will dochne
. ceverally lease their respective portions of the nuclear over the penod of the phase in plan because of fuel and are obligated to pay for the fuel as it is depreciation and federal income tax benefits that consumea in a reactor The lease rates are based on result from the use of accelerated tax depreciation, the various intermediate term note rates, bank rates and amount of revenues required to provide a fair return commercial paper ratet also dechnes Beginning in the sixth year, the revenue The amounts financed for the Company include levels authonzad pursuant to the phase-in plan were nuclear fuel in the Davis Besse, Perry Unit 1 and designed to be sufficient to recover that penod's Beaver Valley Unit 2 reactors with remain,ng lease operating expenses, a f air return on the unrecovered payments of $65,000.000. $28.000.000 and investment, and amortization of deferred operating
$33.000.000, respectively, as of December 31.1990. expenses and carrying charges recorded during the The Company's nucieur fuel amounts financed and earlier years of the plan. All phase in deferrals af ter capitalized also included interest chnrges incurred by December 31,1988 relating to these two units will be the lessors amounting to $ 19,000 LOO in 1990. recovered by December 31,1998 Pursuant to such
$25.000,000 in 1989 and $23.000.000 in 1988 The phascon p;an, the Company deferred the following estimated future lease amortization payments based i990 1989 on projected consumption are $63.000,000 in both g%, g um 1991 and 1992. $66,000,000 in 1993, $62,000.000 in Detened Opmatmg Evmes. $ B 900 $ 52 020 1994 and $56,000.000 in 1995. As these payments D
are made, the amount of credit availab!e to the lescor Can Q ays $ 51421 $ 81.097 becomes available to finance additional nuclear fuet. Equity 1 to 177 135 754 assuming the lessor's intermediate-term notes and $ 161198 $216 851 bank credit arrangements continue to be outstanding --
Under the January 1989 rate order, the amount of (6) REGULATORY MATTERS deferred operating expenses and carrying charges On January 31,1989, the PUCO issued an order which scheduled to be recorded in 1991 through 1993 total provided for three annual rate increases for the $80,000,000, $51,000.000 and $ 9,000,000, Company of approximately 9% 7% and 6% effective respectively. The phase in plan was designed so that with bills rendered on and af ter February 1.1989.1990 fluctuations in sales should not affect the level of B
camings. The order accomplishes this by allowing the potential savings attributable to the Company is 55%
Company to seek PUCO approval to adjust cost ($53,988,000 ) . The Company expects to begin deferrals if actual revenues are higher or lower than realizing most of the savings identified by the audit by amounts projected in the order. The order also provides the end of 1991.
I for the adjustment of deferrals to reflect 50% of the net Fifty percent of the savings identified by the Audit after tax savings in 1989 and 1990 identified by the Panel were used to reduce the 6% rate increase management audit and approved by the PUCO as scheduled to go into effect on February 1,1W1. As discussed in the following paragraphs. No change was d:scussed previously, the Company's rates increased made in the cost deferrals for 1989. The Company 4.35% under this provision as approved by the PUCO deferred an additional $24,102.000 of carrying in January 1991.
charges in 1990 and will request PUCO approval of the The Company has entered into an agreement with de ferral other members of the Audit Panel in which the in connection with the Company's 1989 order and a Company has agreed to use its best efforts to avoid similar order for Toledo Edison, the Company, Toledo rate increases in the years immediately following 1991.
Edison and the Service Corroany have undergone a The 1989 order also sets nuclear performance management audit to assure that operation and standards through 1998. Beginning in 1991, the maintenance expense savings are maximized. The Company could be required to refund incremental audit was conducted under the duection of an Audit replacement power costs if the standards are not met, c Advisory Panel ( Audit Panel) comprised of We do not believe any refurid will be required for the representatives of Centerior Energy, the Ohio Office of Company for 1991. Fossil fueled power plant Consumers' Counsel and the Industrial Energy performance may not be raised as an issue in any rate Consumers. In April 1990, the Audit Panel announced proceeding before February 1994 as long as the that it had identified potential annual savings in Company and Toledo Edison achieve a system wide operating expenses in the amount of $98,160,000 from availability factor of at least 65% annually. This Centerior Energy's 1989 budget level The amount of standard was exceoced in 1989 cnd 1990.
(7) FEDERAL INCOME TAX Feoeralincome tax, computed by mu:tiplying income before taxes by the statutory rates, is reconciled to the amount of federalincome tax recorded on the books as follows.
For the years ended December 31 1990 1989 1988 (thousands of dollars)
Book income Before Federalincome Tax . g7.828 $391.193 $151 129 Tax on Book income at Statutory Rate . $114 862 $133,006 $ 51.384 g increase (Decrease) in Tax Accete<ated depreciat on, 7,140 4,422 6.300 investment tax credita on disallowed nuclear plant . (16.712) - -
Organcation costs , - -
3.343 Taxes, other than federal incomo taxes . (9 469) -
(2.202:
Other items . 1.679 3 546 (2.781)
Total Federal Income Tax Expense . $ 140 974 $ 56.044
[ 95 500 I
16 .
l
Federalincome tax expense is socorded in the income Statement as follows:
For the years ended December 31 1999 19B8 1990_
(thousands of doliars)
Operating Expenses
$ 26.934 1 63 447 $ 82.766 Current Tax Provison. .. . . . .
Changes in Accumulated Deferred Federal Income Tax Acceierated depreciaton and amortizaton , 40 197 35,300 24 445 Alternative minimum tax credit. ,= , (18 86'M (34.874) -
Sale and leasebacit transactons and amortgation. 3.490 3 893 ( t .175)
Property tax expense. (10 880) -
(7.069)
Deferred Cw1P revenues . 11.093 11.005 (4 122) 4.763 (3 155) 11,529 Defermd fou. costs. .
System de,etopment costs. 403 348 5.518 Davis Becse replacement power .
4.136 6 916 Cderai ncome i tax return adjustments - -
(19.349)
Reacqured debt costs 1.887 (872) (872) 1458 2.289 10 874 Deterred operating expenses .
Other items . . . . 13.119 3.620 (4.200)
Invertment Tax Credits . 1489 58 (10.607)
Total Charged to Operating Expenses , 75.099 85.275 94 654 Nonoperating income (25 225) (31,29 ) (48.413)
Current Tai Provison. ... ... . ...
Changes in Accumulated Deferred Federal income Tax Davis-Besse replacement power .
3.015 wnto-ott of nuclear costs t 11.986) -
(91.643) 57.612 8 7.' ; 1 80.923 FUDC .nd carrpng charges.
Taues. other *5n federal income taxes .
5.520 OtUr items .
(544) (2.564)
Total Expense (Credit) to NU. operating income . 20 401 55 699 (53.162)
Federal income Tax included in Cumulative Effect of an - - 14.552 AccounSng Change for Unbdled Revenues ,
Total Taderal incorn Tau Expense . $ 95.500 $140 974 $ 56.044 The Company joins in the fihng of a consolidated federal income tax return with its affiliated companies. The method of tax allocation approximates a separate retum result for each company.
In 1988, a change was made in accounting fc income taxes from the deferred to the liability method. This change did not ir pact net income as thL additional deferred taxes recorded were offset by a regulatory asset on the Balance Sheet.
Federalincome tax expense adjustments in 1990, associfed with previously deferred investment tax credits relatint, to the 1988 write off of nuclear olant investments, decreased the not tax provision related to nonoperating income by $18,712,000.
The favorable 7 solution of an issue conceming the appropriate year to recognize a p:operty tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $10,100,000 ($8.207,000 in the fourth qu?rter),
For tax purposes, net operating loss (NOL) carryforwards of approximately 7 43,279,000. $47,448,000 and
$1ar),833,000 were generated in I v90,1989 and 1988, respectively. The NOL carryforwards are available to reduce future tLable income and will expire in ?003 through 2004 The 34% tax effect of the NOLs generated in each year
($14,715,000, $16.132,000 and $47,884,000 in 1990,1989 and 1988, respectively) is included in the above table as a reduction to deferred federalincome tax relating to accelerated depreciation and amortization Future utilization of these tax NOL carryforwards would resul,in recording the related deferred taxes.
Approximately $11,504,000 of unueed general bustness tax credits are available to reduce future tax obligations.
The unused credits expire in varying amounts in 2001 through 2005. Utilization of these unused credits is limited by provisions of the 1986 Tax Act and the level of future taxable income to which such credits may be apphed.
The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed the AMT, AMT credits of $18,860,000 and $34,874,000 were generated in 1990 and 1989, respectively.
i 17
The settlement (discount) rate assumption was (8) RETIREMENT INCOME PLAN AND OTHER 8 5% for December 31,1990 and 8% for December 31, POSTRETIREMENT BENEFITS 1989. The long term rate of annual compensation The Company and Service Company jointly sponsor a increase assumption was 5% for both December 31, noncontnbuting pension plan which covers all 1990 and December 31,1989. The long term rate of employee groups. The amount of retirement benefits return on plan assets assumption was 8% in 1990 and generally depends upon the length of service Under 1989.
certain circumstances, benefits can begin as early as Plan assets consist pnmarily of investments in age 55. The plan also provides certain death. medical common stock, bonds, guaranteed investment and disability benefits. The Company's and Service contracts, cash equivalent securities and real estate.
Company's funding policy is to comply with the The cost of postretirement medical benefits Employee Retirement income Security Act of 1974 amounted to $4,100,000 in 1990, $2.900,000 in 1989 guidelines and $2.200.000 in 1988. Consistent with current During 1990, the Company and Service Company ratemaking practices, these costs are recorded when offered their second Voluntary Early Retirement paid. .
Opportunity Program (VEROP). Operating expenses in December 1990, a new accounting standard for for both companies included $8,000,000 of pension postretirement benefits other than pensions was plan accruals to cover enhanced VEROP benefits plus issued. This standard requires employers to accrue an additional $20,000,000 of pension costs for VEROP the expected cost of such benefits dunng the benefits being paid to retirees from both companies' employees' years of service. The standard also corporate funds. The $20,000,000 is not included in requires the recording of a cumulative transition the pension data reported below. Operating expenses obligation adjustment which can be recognized for 1990 for both companies also included a credit of immediately, subject to certain limitations, or amortized
$36.000,000 resulting from a settlement of pension over the longer of 20 years or the average romaining obligations through lump sum payments to a service period of active employees expected to receive substantial number of VEROP retirees Net pension and benefits The Company and Service Company are VEROP costs (credits) for 1988 through 1990 for the required to adopt the new standard no later than 1993.
plan were comprised of the following components: Although we have not completed an analysis to 1990 1989 1988 determine the effect of adopting the new standard, we (mithons of dollars) do not expect adoption to have a matonal adverse Pension Costs (Credits)- effect on the Company's financial condition or results of Service cost for benefits eamed operations because of expected future regulatory dunng the conod . $ 10 $ 10 $ 8 treatment, Any liabilities recorded pursuant to the in at st on proiected beneht 26 25 24 standard may be essentially offset by regulatory assets Actual retum on pian assets. (6) (56) (58) to reflect anticipated future revenues associated with Net amortaation and deferral . _(41) 9 14 recovery through rates Net pension credits (11) (12) (12)
VEROP cost. 8 - 4 (9) GUARANTEES Settlement gain. _(3,6) - -
Under two long term coal purchase arrangements, the Net credits . $j39) p)
$ $_(8) Company has guaranteed certain loan and lease The following table presents a reconciliation of the obligations of two mining companies One of these funded status of the plan at December 31,1990 and arrangements also requires payments to the mining 1989 company for any actual out of pocket idle mine December 31. expenses (as advance payments for coal) when the 1990 1989 mires are idle for reasons beyond the control of the (millicos of dollars) minli g company. At December 31,1990, the principal Actuarral present value of benefit amouri! of the mining companies' loan and lease obligatons obligations guaranteed by the Company was Vested benefits. $ 229 $ 236 $85,000.000.
Nonvealed benefits 18 21 Accumulated benefit obhgaton . 247 257 Eftect of future compensation levels . 50 84 Total prom:ted benefit obhgation 297 341 Plan assets at fair market value. 502 587 Surplus of plan assets over projected benet;t obingation 205 246 Unrecognged net gain due to vanance between assumptions and experience (68) (128)
Unrecogneed pnor service cost 8 3 Transition a*, set at January 1,1987 being amortued over 19 years. (103) (118)
Net prepaid pension cost . 5 42 $ 3 lb
(10) CAPITALIZATION There are no restrictions on the Company's abihty to issue preferred or preference stock (a) CAPITAL STOCK TRANSACTIONS With respect to dividend and hquidation rights, the Preferred and preference stock shares retired dunng Company's preferred stock is prior to its preference the three years ended Decomtwr 31,1990 are as stock and common stock, and its preference stock is folbws: not to its common stock W90 G89 m cumulative Preferred and (d) LONG TERM DEBT AND OTHER Preference Stock Subt ect to DORROWING ARRANGEMENTS Mandatory nedempi+on p,ciened Long term debt,less current matunties, was as follows:
5 7 35 Senes C , (10) (10) (10) Actual Decemter 31 War f Matunh in 20 b89
(
{ thousands of dolips) 80 00 Senes G . (1) (2) (5) 145 00 Senes H , (14) (4) (4) Fust mortgage bonds 145 00 Senes t . (4) (4) (4) 1991 8 375% $ -
$ 35.000 Preference . 1991 13 75 -
4.334 1992 15 25 20,000 20.000
$ 77.50 Senes 1 -
(6) (7) 1992 10 58 40,000 40.000 Total .
J2) J0) J 47) 1992 13 75 4.334 4.334 1993 , 3 875 30.000 30,000 (b) EOUlTY DISTRIBUTION RESTRICTIONS 1
j5 5 5 At December 31,1990, consolidated retained earnings 1994 4.375 25,000 25,000
- were $563.559,000. The retained camings were 1994 13 75 4,334 4.334 available for the declaration of cividends on the 1995 13 75 4.334 4.334 Company's preferred and common shares. All of the 1995 7.00 720 720 7
Company's common shares are held by Centenor ny financing by the Company of any of its nonutihty afhhates requires PUCO authorizahon unless h ,
221,750 2006-2010 8.83 921,750 the financing is made in connection with transactions 2011 2015 9.38 448,435 533.435 in the ordinary course of the Company's pubhc utikty 2016-2020 0 01 602,880 592.880 business operations in which one company acts on 2021 2023 8.22 174.300 174.300 behalf of another, 1,906,281 1,930.615 Term bank loans due 1992 1996 8.70 114,400 130.000 (c) CUMULATIVE PREFERRED' AND .. .
550,000 212,500 PREFERENCE STOCK Notes duo 1993 1999. 9 32 Pollution control notes Amounts to be paid for preferred stock which must be duo 1992-2012 6 30 54,260 54,770 redeemed during the next five years are $26,000,000 Otner - net .
6.970 8.494 in 1991, $16,000,000 in 1992 and $31,000,000 in Total Long Term each year 1993 through 1995 Debt, $2.631,911 $2.336.379 The annual mandatory redemption provisions are as Long term debt matures during the next hve years follows:
Shwes Pnce as follows: 572,000,000 in 1991, $99,000,000 in To Be Geoinning Pa' 1992, $271,000,000 in 1993, $42,000,000 in 1994 nedeemed in Sn" and $206.000,000 in 1995.
Preferred in 1989 and 1990, the Company issued gj 73 f.
10 0 3
a4 g
5
$550,000.000 aggregate principal amount of secured rnedium term notes with vanous maturities ranging 75 00 Senes F. . 2,384* 1985 t,000 145 00 Senes I . 1.969 1980 1,000 from 1993 to 1999 and annualinterest rates ranging 113 50 Senes K , 10.000 1991 ' 1,000 from 8.95% to 9.8%. The notes are secured by first Ad i ueablo Senes M , 100.000 1991 100 mortgage bonds.
9125 Sones N . 150.000 1993 100 Dunno 1990, the Company arranged to refund in
' Represents remaining shares to ho redeemed March 1.1991 1992 $78,700,000 pnncipal amount of its First
" All outstanding shmes to be redeemed June 1,1991.
Mortgage Bonds,13Ve% Senes due 20 t 2, which are collateral security for rollubon control refunding bonds The annuahzed cumulative preferred dividend issued by a pubhc authority. The authonty's bonds will requirement as of December 31,1990 is $35,000,000. be refunded at the same hme To effect the refund of The preferred dividend rates on the Company's its bonds, the authonty entered into a contract with Series L and M fluctuate based on prevaihng interest two inshtutions to dehver in 1992 $78,700,000 rates, with the dividend rates for these issues aggregate principal amount of its tax exempt pollution averaging 8 38% and 7.71% respectively,in 1990 The control bonds due December 1,2013 with an interest dividend rate on Remarketed Senes P averaged 8 01% rate of 8% at a price of 97.4S6% for an effective in 1950. interest cost of 8 25% The authontis bonds will be 19
secureo by $78,700.000 pnncipal amount of the these covenants in the event of a write off of the Company's First Mortgage Bonds, 8% Senes due Company's and Toledo Edtson's investments in Perry 2013 8 The proceeds will be used to redeem the Unit 2. barnng unforeseen circumstances authonty's outstanding bonds and refund the 13%%
Senes First Mortgage Bonds in July 1992 The PUCO (11) SHORT-TERM BORROWING authorized the Company to record interest expense ARRANGEMENTS
,] equal to a blend of the higher rate on the outstanding bonds with the lower rate on the new bonds for an The Company had $152.000.000 of bank lines of credit interest expense reduction of $1,000,000 in 1990 and arrangements at December 31,1990 This included a approximately $6,000,000 total in 1991 and 1992 $30.000.000 kne of credit which prov4ded a The Company's mortgage constitutes a direct first $5.000,000 line of credit to be available to the Service lien on substantially all property owned and franchises Company if unused by the Company. There were no held by the Company. Excluded from the lien, among borrowings under these bank credit arrangements at other things, are cash, secunties, accounts receivable, December 31,1990.
Short term borrowing capacity authonzed by the E fuel and supplies Additional first mortgage bonds may be issued by PUCO is $300.000_000 The Company and Toledo Edison have been authonzed by the PUCO to borrow the Company under its mortgage on the basis of bondable property additions, cash or substitution for from each other on a short term basis.
refundable first mortgage bonds. The issuance of Most borrowing arrangements under the short term additional krst mortgage bonds by the Company on the bank knes of credit require a fee of 0.25% per year to basis of property additions is hmited by two provisions be paid on any unused portion of the knes of credit of its mortgage One relates to the amount of for those banks without fee requirements, the average bondable property available and the other to camings daily cash balance in the bank accounts satished coverage of interest on the bonds Under the more informal compensating balance arrangements restrictive of these provisions (currently, the amount of At December 31, 1990, the Company had bondable property available), the Company would $87,110.000 of commercial paper outstanding. The have been permitted to issue approximately commercial paper was backed by at least an equal
$369,000,000 of bonds based upon available amount of unused bank knes of credit bondable property at December 31, 1990 The Company also would have been permitted to issue (12) CHANGF IN ACCOUNTING FOR UNBILLED approximately $159.000.000 of bonds based upon REVENUES refundab!c bonds at December 31,1990 If Perry Unit 2 had been canceled and wntten off as of December 31, Poor to 1988 revenues were recorded in the 1990, the Company would have been permitted to accounting penod dunng which meters were read issue approximately $20,000,000 of bonds based Utihty service rendered af ter monthly meter reading upon available bondable property and approximately dates through the end of a calendar month (unbilled
$159,000.000 of bonds based upon refundable bonds revenues) became a part of operating revenues in the at December 31,1990. following month in January 1988, the Company An agreement relating to a letter of credit issued in adopted a change in accounting for revenues in order connection with the sale and leaseback of Beaver to accrue the estimated amount of unbilled revenues Valley Unit 2 (as amended in 1989) contains several at the end of each month financial covenants affecting the Company, Toledo The adoption of this accounting method increased Edison and Centenor Energy. Among these are 1988 not income $3,363.000 (net of $1,733.000 of covenants relating to eamings coverage ratios and income taxes) before the cumulative effect on penods capitali2ahon rabos The Company, Toledo Edison and poor to January 1,1988 The cumulattve effect of the Centenor Energy are in cornpbance with these change on the penods poor to January 1,1988 was covenant prove, ions We bekeve the Company, Toledo $21,874.000 (net of $14.552,000 of income taxes)
Edison and Centenor Energy will continue to meet and was included in 1988 net income 3
1 (13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations for the two years onded December 31, 1990.
Quariers Ended March 31 June 30 Sept 30 Dec 31.
(thousands of doilars) 1990 i Operating Revenues. .
$386,116 $401,850 $478,384 $389,494 I Operating Income . , , 76,273 57,599 130,348 82,161 Net income , , ,, , 43,831 43,019 95,005 60,473 Eamings Available for Common Stock 34,280 33,682 86,043 51,641 1989 Operating Revenues. ,, . . . $381.835 $401.772 $448,091 $359,964 Operating Income . 79,766 91,486 111,372 2,802 Net income . . ,, , 71,113 63.273 89,560 26.273 Eamings Available for Common Stock . . . , 60,586 52,761 79,729 16,916 Earnings for the quarter ended June 30,1990 were increased as a result of federalincome tax expense adjustments associated with deferred investment tax credits relating to the 1988 write off of nuclear plant investments See Note 7. The adjustments increased quarterly earnings by $18,391,000.
Eai,ongs for the quarter ended December 31,1990 were increased as a result of year end adjustments of
$18,030.000 to reduce depreciation expense for the year (see Summary of Significant Accounting Policies).
$24,102,000 to increase phase in carrying charges (see Note 6) and $8,207,000 to reduce federal income tax expense (see Note 7). The total of these adjustments increased quarterly earnings by $37,000,000.
21
FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars)
Total Total Totai $ team Operating Nesgjenhal Commercup irdoMnat Other Retipi WNuetNe ( tect4c Heahng Hevenuel Year -
1990 $495158 $494 370 $543 813 $122 701 $1656 042 $ (198) $1655 844 $ - $1655 844 469 803 452 911 519 854 117 220 1 559 788 31 874 1 591 662 -
1 591 662 1989 436 413 395 165 476 063 59 804 1 367 445 84 133 1 451 578 -
1 451 578 1988.
1987. 428 786 389 297 470 861 12 322 1 301 266 9 378 1 310 644 13 371 1 324 015 410 153 382 773 461 408 60 245 1 314 579 192 1 314 771 12 953 1 327 724 1986.
268 787 220 677 323 764 25 454 838 682 39 819 878 601 15 065 893 566 1980.
Operating Expenses (thousands of dollars)
Otrer Fuel & Operahon Depreciaton Taues Phase wT & F edera! Total Purchased & & Other Than Pre phase in income Operating Power Maintenave Amortizabon Fif Deler'ed Nel lanes E=penses Year 1990. $377 082 $514186 $175 654 $197 454 $ (30 012) $75 099 $1309 483 1989. 384 543 508 151 193 279 183 120 (4B 132) 85 275 1 306 236 1988. 307 014 524 478 189 731 184 813 (104 396) 94 654 1 196 294 1987. 330 290 425 938 148 918 146 407 (47 826) 83 179 1 086 906 1986, 363 518 388 388 103 179 143 495 -
97 074 1 095 654
'980. 359 388 195 840 64 619 81 630 -
41 574 743 051 income (thousands of dollars)
Federal Otner income income income & Taues- Betcre Operahng AF UDC- Dedochons. Carrying Cred t interest Year incume E quity Net Charces ( E aponse) Charges 1990, $346 381 $ 4 531 $ 1 836 $161598 $(20 401) $493 945 1989. 285 426 8 362 7 934 234 788 (55 699) 480 811 1988. 255 284 8 052 (243 297)(a) 224 585 53 162 297 786 1987. .237 109 177 170 (41 940) 24 610 79 606 476 555 1986. 232 070 178 826 (6 255) -
64 544 469 185 1980. 150 515 40 873 7 605 -
13 962 212 955 income (thousands of dollars)
Income Before Cumulaw.e Cumulatue Preferred & E amengs EMect of an EMect of an Preference A v ailatae Debt AF UDC- Accountag Account ng Net Sicck for Common Y ear Interest Debt Cha Ne Change income Dodends Sic <k 1990. $254 936 $ (3 319) $242 328 $ - $242 328 $36 682 $205 646 1989. 238 042 (7 450) 250 219 -
250 219 40 227 209 992 1988. 228 879 (4 304) 73 211 21874(b) 95 085 42 506 52 579 1987. 249 958 (82 985) 309 582 -
309 582 43 386 266 196 1936. 232 133 (62 832) 299 884 -
299 884 39 784 260 100 1980. 112 623 (25 051) 125 383 -
125 383 27 711 97 672 (a) includes wnte-off of nuclear costs in the amount of $257.400 000 in 1968 (b) In 1988, a change in the method of accounting for unbdied revenues was adopted 22
. ~. -.- . - - . - , . - - .. ~. - .-.. . . - .- -- - . _ _ _ . ~ . - -
-THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDl/AIES Electric Sales (millions of KWH) Electric Customers (year end) Residential Usage Average . Average Aerage Pnce Revenue Industrial KWH Per Per Per Aesdent,ai Commercial Indusinal Wholesale Other Tolet KWH . Customer J Year ' Resxtential Commercial & Other - _ Total Customer 1990; 4 716 5 234 8 551 - 463 18 964 665 000 68 700 8 351 742 051 6 867 10.534 $723.15 l
'989. . - 4 789- 5208 8 780 87 501 19 365 660 786 68 030 8 329 737 145 7 025 9 81 691.83 1988. 4 852 4 998 - 9 013 481- 472 19 816 657 592 66 606 8 203 732 401 7 152 8 99 646 35 1987. 4 682 4 818- 8 396 55 485 18 436 654 021 64 978 8 155 727 154 6 927 9.16 637.46 1986.u 4 586 4 744 7 927 -
460 17 717 651 327 63 292 8 000 722 627 6 810 8 94 611,34 1980. , 4 463 4 149 8 062 1 070 416 18 160 642 845 60 070 7 642 710 557 6 686 6 05 404 37 Load (MW & %) Energy (millions of KWH) Fuel )
Operatue i Capacity Net E ncency. :
Company Generated f uel Cost at hme Peak . Capacity Load Purchased UTU Per !
Year of Peak load Margin F actor F ossil Nuclear Total Power Total Per KWH FWH
]
1990,+. 4 685 3 778 19.4% 63.3% 15 579 5 262 20 841 (643) 20 198 1.52c 10 417 1989'. 4 536 3 866 - 14 8 65 2 14 968 6 570 21 538 (777) 20 761 1 49 10 506 1 1988.. 4 468(c) 4 067 -00 59 8 15 756 4 480- 20 236 1 091 21 327 1.59 10 517
'1987. 4 257 3 722 12 6 62 5 14 978 3 689 18 667 1 248 19 915 1 56 10 596 1986 ; 3 775(c) 3 601 46 62.2 16 277 12 16 289 2 86J 19 152 1.78 10 464 l 1980. 4 353 - 3 325 23 6 S4.3 14 486 1083 15 569 3 894 10 463 1 67 10 635 Investment (thousands of dollars) consinxten Work in Total Utihty Accumulated . Protyess Nuclear Property, Utahty Plant in ' Depreciadon & Net & Perry Fuetand Plant and Plant Total Year Servee Amortizaton Plant Unit 2 Other Equipment Addilone Assels 1990. .. $6 041878 $1410 051 - s4 631 827 $ 696 696 $344 252 $5 672 775 $164 619 $7 945157
.1989., 5 878 825 1 264 570 4 614 255 '726 933 354 374 5 695 562 153 440 7 670 405 l 1988, 4 622 988 763 628 380 573 5 767 189 211 060 7 456 198 5 704 746 _ 1_081 758 1987. . -5 787 603 905 297 4 882 306 633 433 389 281 5 905 020 566 947 7 089 026 '
I 1986. . 3 196 730 - 951 917 2 244 813 3 067 837 383 542 5 696 192 670 585 6 209 692
.1980, ,
2 404 255 557 859 1 846 306 811 084- 62 259(d) 2 719 739 398 088 3 135 584 Capitalization (thousands of dollars & %)-
a Preferred & Preference Preferred Stock, without stock with Mandatory Mandatory Redemption Year : Common Stock dounty Redempton Provisions Provisions Long-Term Debi Total 1990. ... $1884 258 38 % $171 162 3% $217 334 4% $2 631911 55% $4 904 665 )
1989.. . 1 828 074 40 212 362 4 217 334 5 2 336 379 51 4 594 149 1988. t 780 408 40 232 626 5 217 334 5 2 260 170 50 4 400 538
-1987'. , ., -1 925 719 41 270 645 6 217 334 4 2 317 957 '49 - 4 731 655-1986. I 843 974 40 339 017 7 144 021 3 2 311 455 50 4 638 467
- 1980.. 4 - 912 731 37 260 500 11 95 071 4 1211528 48 2 479 830 (c) Capacity data reflects extended generating unit outages for renovation and improvements
' (d) Restated for effects of capitalization of nuclear fuellease and financing arrangements pursuant to Statement of Financial Accounting Standards 71.
~
c L _
INVES' LOR INFORNIKI'IGN l
l StIARE OWNER INFORNIATION INDEPENDENT ACCOUNTANTS INQUIRIES Questions regarding the Company or stock Arthur Andersen & Co.
accounts should be directed to Share Owner 1717 East Ninth Street Services at Centerior Energy Corporation at Cleveland, OH 44114 the address and telephone numbers indicated below for the Stock Transfer Agent. FORM 10.K Please have your account number ready The Company will furnish to share owners, when calling. without charge, a copy of its most recent annual report to the Securities and Exchange Commission (Form 10 K)and,upon payment S' LOCK TRANSFER AGENT f a reas nable fee, a copy of each exhibit to Centerior Energy Corporation L, tm 10.K. Requests should be directed to Sharc Owner Services the Secretary of Centerior E,nergy Corporation P.O. Box 94661 at the address of the Stock Transfer Agent.
Cleveland, OH 441014661 In Cleveland area 642 6900 or 447 2400 110NDIIOLDER INFORNINFION Outside Cleseland area 1 800 433 /794 IlOND TRUSTEE Stock transfers may be presented at Mmgan Guaranty Trust Company of New Wrk PNC Trust Company of New York 40 Broad Street, Fifth Floor Corporate Trust Administration New York, NY 10004 60 Wall Street New York, NY 10260
- E " "
S' LOCK REGISTRAR Ameritrust Company National Association llOND PAYING AGENT Corporate Trust Division inquiries regarding interest payments should F.C).130x 6477 he directed to either hlanufacturers Hanover Cleveland, OH 44101 Trust Company or Morgan Guaranty Trust Company of New York for the series of bonds EXCllANGE LISTINGS for which each acts as paying agent as noted Preferred Stock Series A B and L are listed below.
- on the New York Stock Exchange. Co-paying agents for 3%% Series due 1993 4&% Series due 1994 DIVIDEND REINVl?STMENT AND STOCK Manufacturers Hanover frust Company PURCilASE PLAN AND INDIVIDUAL 40 Wall Street RETIREMENT ACCOUNT (IRA) New Wrk, NY 10015 Centerior Energy Corporation has a Dividend Ameritrust Company National Association Reinvestment and Stock Purchase Plan which provides Cleveland Electric share owners of 900 Euclid Asenue Cleveland, OH 44114 record and other investors a convenient means of purchasing shares of Centerior common Paving agent for all other series of bonds-stock by investing a part or all of their quarterly Mmg n Guaranty Trust Company of N,ew York dividends as well as making cash imestments.
60 Wall Street In addition, individuals may establish an New York, NY 10260 IndividualRetirement Account (IRA)which invests in Centerior common stock through the Plan. Information relating to the Plan and the IRA rnay be obtained from Centerior Share Owner Services.
24
THE CLEVELAND ELECTRIC ILLUhllNKl'ING COhlPANY L' ^E P.O. Ilos 5000. Cleveland, Ohio 44101 US h S GE PAID CLEVELAND, OHto PE RMiT NO. 409
_ - - - - _ _